Chapter 6

Getting That Cash Flow

Next up in determining an appropriate benchmark: cash flow needs.

A common statement folks make about their investments is, “I need this to provide for me in retirement.” They want their portfolio to kick off enough cash to cover living expenses—now or in the future, partially or wholly. Maybe those are your living expenses (when I say “your” I’m including your spouse, if you have one). Maybe they’re yours and/or living expenses of a loved one—a parent, a child still living with you.

But how much do you need? Many investors—even those about to retire, even those already retired—may not know. And if they do know, they may not know if that amount is feasible now and for the rest of their time horizon (provided they’re even thinking about time horizon right).

Then, too, plenty of mythology abounds about how to get income from a portfolio and what a reliable level of income is. This chapter covers:

  • Why a portfolio full of high-dividend stocks won’t guarantee secure future cash flows.
  • Why “income” and “cash flow” aren’t necessarily the same thing.
  • How to project future cash flow needs.
  • Ways to determine if your desired cash flow level is reasonable and feasible.

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