Client Deliverables
Covering the spend.
A household needs a fixed amount of cash from its portfolio each year. The question this examination answers is narrow and concrete: in year one, does the income arrive — or does the household have to sell holdings to make up a shortfall? We benchmark a custom income-oriented strategy against two conventional stock-and-bond index blends on that single test.
The question we actually answer
Coverage is the cleanest way to compare income approaches. Take the annual spending need, divide the portfolio's after-tax cash income by it, and you get a coverage ratio: above 1.0×, the income funds the life with surplus; below 1.0×, the gap must be filled by selling assets. We hold the starting capital, the spending need, and the tax treatment identical across every approach, so only the income engine differs. This is a benchmark of cash coverage in a single year — not a forecast of wealth.
On the same illustrative ~$1.6M base against a $30,000 spending need, the custom income strategy covers the spend roughly 1.77× with surplus, while both conventional index blends land below 1.0× — a structural shortfall that, in those approaches, is met by selling holdings in year one.
| Approach | After-tax Yr-1 cash | Coverage of spend | Result |
|---|---|---|---|
| Custom income strategy | ~$53,000 | ~1.77× | Surplus |
| 70/30 index blend | ~$28,300 | ~0.94× | Shortfall |
| 80/20 index blend | ~$26,000 | ~0.87× | Shortfall |
Illustrative. Conventional-blend income modeled from a ~1.5% equity dividend yield and a bond sleeve at its honest long-run return, not its current distribution yield. Coverage below 1.0× implies asset sales to fund the shortfall. A benchmark of one year's cash, not a performance projection.
"Either the income covers the life, or the life sells the portfolio."
How the examination is built
- Fix the spending need. One annual cash requirement, applied identically to every approach.
- Hold the base equal. Same starting capital and same tax treatment, so only the income engine varies between approaches.
- Use honest income inputs. Equity dividends at their real yield; bonds at their realized long-run return, not a headline distribution figure.
- Compute coverage. After-tax income divided by the spending need yields a clean ratio above or below 1.0×.
- Name the consequence of a shortfall. Below 1.0× isn't a footnote — it means selling holdings in year one to fund the gap, which we state explicitly.
What this examination is — and is not
This is a one-year cash-coverage benchmark of a custom strategy against conventional index baselines. It is not a recommendation of any strategy, security, or allocation, and it does not predict returns or wealth. It isolates a single, testable question — does the income cover the spend — and reports the arithmetic. Every decision stays with the household.
Want this checked against your actual account?
This examination shows one way money can quietly leave a portfolio. If you want us to examine what may be happening in your actual accounts, request a confidential fee review.
Related examinations
The Apples-to-Apples Benchmark — Five income strategies run through one identical set of assumptions, so the only thing that varies is the strategy itself.
The Fee-on-Income Examination — How a fee that looks small against total assets can claim a large share of the income a household actually lives on.
The Idle-Cash Examination — How two near-identical brokerages can pay wildly different rates on the cash left sitting idle in an account.