Mark McIlroy retirement fund

Product design

September 2021




1. Deposit the funds, 95% into a low cost ASX200 ETF such as A200.

2. Keep the other 5% in cash to pay the income.

3. Deposit the A200 distributions into the cash fund.

4. Draw income at the rate of 7% of the account balance, payable weekly and recalculated quarterly. Since the ASX200 returns 11% p.a. over the long term this should be sustainable indefinitely.

5. Sell part of the capital value if necessary when the cash balance falls to 1%.




Advantages

No fees apart from a very minimum management fee on the A200.

The capital value is preserved to pass on.

No friction losses (brokerage, market spread etc.) from trading.

Tax advantages due to franked distributions.




Disadvantages

The capital value would be quite volatile.

If a large investment was made with unlucky timing immediately before a market crash the returns would be reduced.