Well, if that 4% goes toward so-called fixed costs, then the cottage roof renovation, the house bathroom renovation, and a car replacement have to be covered from somewhere, meaning that sometimes you also have to dip into the capital.
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That 4% is a pretty bulletproof figure even during major crashes; something like 5% might still be doable, but beyond that, you’re taking a real risk regarding whether the money will last.
Just think about the Nasdaq’s long slog, where it took 14 years after the turn of the millennium to return to its previous levels. If you had withdrawn 4% of the original investment plus inflation adjustments throughout that entire time, it would have done some ugly damage to the portfolio.
I’ve been in the market throughout that whole period, and investing in the early 2000s would have been really frustrating if it hadn’t been for the Russian markets, where you could decuple your money in just a few years. Diversification paid off.
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I doubt it spoils anyone else’s fun. Everyone pays their own way. There are always those whose hobbies cost more than those of the average Joe and Jane.
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I would build such a portfolio from 4-5 elements:
Dividend Powerhouses, which are historically good dividend payers with at least decent outlooks. For example, Nordea, the British Mandatum aka Legal & General, and from the US BDC (Business Development Company) group, e.g., Hercules Capital, Blackstone Secured Lending Fund, New Mountain Finance. They yield close to 10%, and even though weak economic cycles occur, you should receive something even in bad times.
Corporate Fortresses, characterized by stability and resilience to economic cycles. Textbook examples are Sampo and Coca-Cola. Lower but more stable dividends. With these companies, it’s worth waiting patiently for moments when they are priced more attractively than usual (otherwise the yield isn’t that high).
Growers that remember their owners (with dividends). Companies with ambitious growth programs that still provide at least some dividends for inflation protection, often with a growing dividend over the years. Typical examples in the pharmaceutical industry are Finland’s Orion and France’s Sanofi.
ETFs etc. - there are also income-producing options here, and you can choose between those that accumulate dividends within the fund or those that pay out dividends every year. For example, Xact Norden Högutdelande.
Investment companies have some interesting options. Investor is world-class royalty, but its price is currently at a peak, and Berkshire Hathaway’s P/B ratios are similarly sky-high with unclear future prospects. Interesting options include something from the Brookfield family of companies in Canada or other Swedish investment companies (Lundberg, etc.).
For the retirement portfolio you’re describing, I wouldn’t include fashion and (mega-) tech stocks at all. Sure, the returns can be huge if you get it right, but generally, there’s plenty of volatility, constant price swings, meager dividends, and growing risks around the likes of Tesla, Alphabet, and Amazon.
Portfolio size? If you emphasize dividend powerhouses, even less than €1.2 million would suffice. Still, in my opinion, you get the best night’s sleep if the foundation of the portfolio is among the corporate fortresses. I would invest the most in those when building a retirement portfolio for the loooooong term.
Does not contain investment recommendations, just my own thoughts 
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In my opinion, investing in individual companies requires regular monitoring; you can’t just pick a bunch of stocks and lull yourself into believing that the business will continue to perform as before. For that reason as well, I would be more in favor of index funds, selling from them a few times a year to cover expenses.
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I personally would emphasize stable dividend payers that are likely to be able to pay good dividends even during tougher times without the business suffering significantly. If you have to sell parts of your portfolio to pay for your groceries, then when a deeper and/or longer dip hits, you’ll end up eating a thicker slice of the future cake in addition to your food. So if you take that approach, I would definitely keep some kind of reserve fund that would allow for some wiggle room in such a situation. But of course, everyone has their own style.
I’m pretty much on the same page as @PorssiPatruuna, meaning I would build my own retirement portfolio from a few elements/baskets. As an example, something like this:
Survival basket (i.e., companies that spit out good dividends even if hell freezes over and indices are scraping the bottom, and whose cash flow keeps you alive):
- Toronto Dominion Bank
- ATCO
- Johnson & Johnson
- Fortis
High cash flow basket (in normal times, these bring the butter and sausage onto the bread):
- More stable BDCs, such as Ares Capital
- A bit more conservative REITs, such as NNN
- Midstreamers on the more stable end, such as Enbridge
“Growth” basket (high-quality companies with a long history that ensure some kind of growth / inflation protection. Would this be the “cherry on top”, if we continue the food analogy):
- Investor AB / Brookfield Corporation / Brookfield Asset Management
- Canadian National Railway
- RTX
And although it’s good to monitor individual stocks from time to time, as far as Toronto Dominion is concerned, hands up anyone who remembers the year the company last didn’t pay a dividend at all? Anyone? Yep, just as I thought… Fortis, for its part, has increased its dividend annually for half a century, JNJ for even longer, and poor old NNN for only the last 33 years.
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It’s good to remember, of course, that the accumulation units (growth units) of index funds reinvest dividends tax-free into buying additional shares, meaning the number of shares grows continuously. You can, of course, (try to) do the same with dividend stocks within an equity savings account (osakesäästötili) or an investment insurance policy, for example.
For me at least, the total return on investments in euros is what matters most. I still maintain that the portfolio review twice a year mentioned in the opening post is poorly suited for a portfolio built from individual stocks. The outlook for even a previously stable company can start to weaken for the long term, at which point you should be alert to take action. A dividend yield that remains unchanged won’t provide much comfort if the share price manages to drop by an amount equivalent to several years’ worth of dividends.
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There certainly isn’t a silver bullet suitable for everyone here (either); needs and preferences are very individual. If there are decades left until retirement, it’s definitely worth seeking growth a bit more aggressively, rather than starting to “wind down” with a retiree’s dividend portfolio. But apparently, the thread starter meant the situation of what kind of portfolio one would be using once retirement arrives. It usually tends to be that at the beginning of an investment career (often when younger), total return matters a lot, and closer to retirement/in retirement, total return is no longer as decisive as a good and steady stream of income without surprises. In other words, it’s specifically that stable dividend that provides comfort, and price behavior becomes secondary. Of course, it’s not like this for everyone, but I still dare to make a bold claim that it’s something along those lines more often than not.
And I personally agree that a retiree shouldn’t need to prune a portfolio consisting of individual stocks even once a year, but closer to once every ten years — if even then. History is indeed no guarantee of the future, but with, for example, that model portfolio pulled out of a hat (cough cough), I could easily close the stock exchange for the next ten years and sleep soundly knowing it puts bread on my table. I actually happen to own every company mentioned.
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If you invest directly in stocks, you are a stock picker. In my opinion, a stock picker should monitor the companies they own very actively; otherwise, things could go south. For a retirement portfolio, choose relaxed index funds if you plan to spend your time mostly at the end of a pier rather than browsing through company reports.
There are quite big differences in stock picking regarding how peacefully you can fish for perch at the end of the pier. I think companies like Investor AB, ATCO, and Johnson & Johnson, for example, are the kind where you can head out to fish with total peace of mind. If you want to read Investor’s annual report by the fireplace once a year, you can do it just for the love of the game and the good storytelling, not because you need to actively monitor it. Once you’ve gathered a few handfuls of companies like that into a retirement portfolio, there’s no rush to leave the pier to listen to earnings releases.
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I’d like to clarify a bit more to avoid any misunderstandings. A dividend-reinvesting (accumulating) fund or ETF uses dividends to buy more shares of the companies it owns. If there is a deeper dip, that means more shares. Regardless, an investor can sell holdings equivalent to the value of the dividends without eating more of the “cake” than the dividends represent. And often at quite a low tax rate. Direct dividend stocks are not a necessity for enjoying a dividend stream. This is a misconception one encounters every now and then.
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Absolutely true and a good reminder that there are several ways to generate (dividend) cash flow, regardless of what types of instruments you have in your portfolio.
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Yeah, what could be better than selling off slices of an index ETF held for decades in retirement using the deemed acquisition cost; it always beats dividends.
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That deemed acquisition cost was a good point. Since you can keep taxes somewhat in check with it, although on the OMXH, the GI hasn’t risen enough in 10 years for it to be worth using… 15y +250% so it’s ±0…
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If income isn’t so high that you need to tighten your belt to accumulate capital, it should suffice if the portfolio returns are enough to cover the expenses of the first 10 years. The acquired capital is then enjoyed until the very end. Depending on how long you wait for the grim reaper, something will be left as a nest egg for your descendants as well.
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Once that retirement portfolio is built, it’s time to start thinking about the time after the ”end” through estate planning 
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Isn’t it 150% for it to be a break-even situation?
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It’s worth noting that if retirement age is still decades away, these tax rules will have time to change according to political winds (weather vanes).
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Or then move the books to a country where there are likely fewer of these political weather vanes..
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True, I just made a rookie mistake ;-(
That changes the situation quite a bit…
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