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SFM Sustainable Income Portfolios

As of September 30, 2020Max Drawdown (5 yr)Dividend Yield3-Month Return1-Year Return3-Year Avg. Annual ReturnAnnual Portfolio CostStrategy Summary
Ultra-Conservative4%1.9%0.6%2.9%2.5%0.2%More Info
Conservative Income27%3.1%4.4%4.2%7.7%0.4%More Info
Moderate Income30%2.9%5.8%5.7%8.3%0.4%More Info
Aggressive Income32%2.8%6.1%3.6%8.2%0.4%More Info
CEF-Arb BalancedNA7.7%0.3%-7.1%2.9%1.3%More Info


Invest Now

What options do people have for generating income from their savings in retirement?


The “safest sounding” decision would be to convert your retirement savings into lifetime income by purchasing an immediate annuity that guarantees you monthly payments for as long as you live. While that may feel “safe”, we need to consider the hidden risks of such a product (a single premium immediate annuity - SPIA). 

  1. Immediate annuities don’t often include an annual cost-of-living increase. 
  2. You undertake risk that the insurance company can’t fulfill their promise (AIG on the verge of collapse in 2008?). 
  3. Most importantly—you lose your flexibility, and your principal; there will be no money for your heirs. 

That is one HUGE, irreversible decision: to hand over your nest egg to an insurance company for the promise of lifetime income.

That doesn’t even take into account the “return” you’ll get on your money. These days, income from immediate annuities often nets you about 6% of the premium paid (i.e. money “invested”) per year. That’s not a “return ON your money” of 6%; that’s a "return OF your money" you’ll be getting back for the first 17 years. In effect, the insurance company is betting you won’t outlive the interest they’ll earn on your savings in those first 17 years. We think the best annuity you can buy is Social Security (untapped benefits after age-62 grow at nearly 8%!). If you’re considering an annuity for retirement income, the first step would be to defer your Social Security benefits until age 70

Since the low interest-rate environment that commenced in 2008, Sommers Financial Management has developed “annuity alternatives” that we call Sustainable Income Portfolios (SIPs). They are designed with the aim of regularly taking the inflation-adjusted income from your investment portfolio, without eating away at the principal over time

While the principal value of your portfolio will fluctuate with the market, it should not affect the income produced by the holdings. We know from history that markets tend to rise over time (even with some down years), so we are betting that the portfolio will maintain principal throughout your golden years. We’ve built SIPs fit for conservative investors, moderate investors, and aggressive investors—and they all generate annual income payouts between 3% and 9%, not accounting for a rise—or occasional decline—in principal. 

We encourage you to “SIP income from your investments”. Our Sustainable Income Portfolios (SIPs) are designed so that you can have your cake—and nibble from it, too!