The Layered Cake Strategy
First, let’s get some assumptions out of the way. It cannot go without saying that detailed planning and understanding of household assets and liabilities, is paramount to any portfolio construction activities, and before moving forward with The Layered Cake strategy you should consult your accountant, estate planning attorney and anyone else intimate with your financial condition, goals/objectives, etc.
Second, the income investor should embrace the idea that retirement assets are there for support during retirement, first. All considerations for gifting, though important, should not take priority. In other words, be prepared to consume principal along with dividends, interest and gains. After all, that is what it is there for...you.
Perhaps the most common misconception in income investing is that in order to have a successful income portfolio the investor MUST live off the interest and dividends of the portfolio, only. However, that disposition requires that, for most income sensitive investors, an incredibly large amount of investable assets are needed to meet the household income requirements now, and in the future. That is not true for all investors. Spend some time and explore the Layered Cake Strategy with your trusted advisers to see if it is appropriate for your retirement needs. After all, you worked very hard to reach retirement, so sacrificing your hard-earned lifestyle would be a little bittersweet.