PT  - JOURNAL ARTICLE
AU  - Steve Sapra
AU  - Sean Klein
AU  - Rene Martel
TI  - Asset Allocation for Retirement Income: A Framework for Income-Oriented Investors
AID  - 10.3905/jpm.2023.1.458
DP  - 2023 Jan 09
TA  - The Journal of Portfolio Management
PG  - jpm.2023.1.458
4099  - https://pm-research.com/content/early/2023/01/09/jpm.2023.1.458.short
4100  - https://pm-research.com/content/early/2023/01/09/jpm.2023.1.458.full
AB  - Certain investor types, particularly those approaching or in retirement, care about the income properties of investment portfolios. This article addresses the income characteristics of equities and bonds and provides a framework for building multi-asset portfolios with varying degrees of income orientation, both ex-post, investigating the historical income behavior of equities and bonds, as well as through a forward-looking lens, based on today’s much lower dividend and bond yields. Because bond yields and prices are inversely related, bonds imbed a natural time-diversification property across the two dimensions that income-oriented investors care most about: portfolio income and expected wealth. Despite the long-term growth potential of equity income and the prospect for higher bond yields over the next several years, we still find that a meaningful allocation to bonds is likely optimal for investors with an orientation toward organic portfolio income.