Investing in Retirement

Investing in Retirement: Why a Total-Return Strategy is Best

Many retirees worry about shifting their investment portfolio to focus on generating income, often turning to high-yield investments, mutual funds with hefty fees, or even costly deferred sales charge (DSC) funds. However, there’s a better way to invest in retirement: the total-return approach. This method ensures a well-diversified broad market ETF portfolio, allowing retirees to preserve wealth, minimize risk, and withdraw strategically for long-term financial stability.

The Problem with Focusing Solely on Income

Traditionally, many retirees remodel their portfolios to focus on generating income. This approach often involves:

Investing in dividend-paying stocks
Buying high-yield bonds
Holding mutual funds with high fees and DSCs

However, this strategy presents several risks:

Dividend Stocks are Volatile: Dividend cuts happen during economic downturns.
High-Yield Bonds are Risky: Higher yields often mean higher risk and lower credit quality.
Mutual Funds Charge High Fees: Many funds take 2%+ in annual fees, eating into retirement income.

A better way to invest in retirement is to focus on total return, not just income.

What is a Total-Return Investment Strategy?

A total-return approach means investing for growth, income, and capital appreciation—not just high-yield investments. It uses a mix of stocks and bonds in low-cost ETFs, selling assets strategically when needed rather than relying solely on dividends and interest.

Key Benefits of a Total-Return Approach:

More Diversification: Broad market ETFs hold thousands of companies, reducing risk.
Lower Taxes: Capital gains taxes are often lower than taxes on interest and dividends.
Steady Portfolio Growth: The portfolio grows consistently over time.

Example: A $500,000 Non-Registered Portfolio (2015-2020)

Let’s compare how a total-return approach works using a $500,000 portfolio from 2015-2020, invested in a balanced ETF allocation:
Portfolio Allocation:
60% Equity ETFs (broad market index ETFs tracking global stocks)
40% Bond ETFs (investment-grade bonds for stability)

Year	Portfolio Value (Start)	Annual Return (%)	Withdrawal (4%)	Portfolio Value (End)
2015	$500,000	6.2%	$20,000	$513,000
2016	$513,000	7.5%	$20,520	$530,200
2017	$530,200	8.3%	$21,208	$549,500
2018	$549,500	-2.1%	$21,980	$515,200
2019	$515,200	11.5%	$22,608	$553,800
2020	$553,800	9.8%	$23,152	$582,400

Despite annual withdrawals, the portfolio grew from $500,000 to $582,400 in 5 years.
A total-return approach allows withdrawals without relying on dividends or high-yield bonds.
Lower taxes: Strategic withdrawals keep capital gains lower.

Why Avoid Mutual Funds & Deferred Sales Charges (DSCs)?

Many retirees invest in mutual funds that come with high fees and lock-in periods. Here’s why ETFs are better:

Lower Fees: ETFs charge 0.1%-0.3%, mutual funds 1.5%-2.5%.
No Lock-in Periods: ETFs are freely tradable.
More Transparency: ETFs track indexes, avoiding risky fund manager decisions.

Final Thoughts: A Safer, Smarter Retirement Investment Strategy

A total-return approach is the best strategy for retirees who want steady growth, lower risk, and tax efficiency. By using broad market ETFs and selling assets strategically, retirees can maximize returns while maintaining a well-diversified portfolio.

Less Risk: More diversification vs. relying on high-yield assets.
Lower Taxes: Capital gains are more tax-efficient than dividends.
Consistent Growth: Focus on total return, not just income.

The Bottom Line

Retirees often mistakenly chase income-focused investments like high-yield bonds, dividend stocks, and expensive mutual funds. A better retirement strategy is the total-return approach, investing in diversified ETFs to achieve consistent growth, lower risk, and tax efficiency, while withdrawing strategically rather than relying solely on dividends or interest.