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  • Writer's pictureMark Fonville, CFP®

Your Approach to Investing for Retirement

Updated: Nov 1, 2023

The approach you use when investing for retirement can make or break your long term goals.

The truth is, there are many different investing strategies available for pre-retirees looking to grow their nest egg. However, these varying tactics tend to boil down into a few distinct categories:

  • Yield

  • Total Return

Let’s unpack the difference between these two strategies, and outline the benefits and drawbacks to each.

The Yield Approach to Investing for Retirement

The Yield approach to investing is exactly what it sounds like - this approach prioritizes chasing income as the priority. These investors generally also want to preserve their principal so their investments can become an income “engine” that never depletes. Asset growth is a secondary goal here. This could include investing in vehicles that are often viewed as “safe” investments - like CDs, or bonds.

There’s nothing inherently wrong with a yield-focused approach to retirement investing. However, it does require more principal upfront, as you’re less focused on growing your assets into a suitable income that you can draw from during retirement, and more focused on turning your principal into income during your years as a retiree.

This slower asset growth may be problematic for some retirees who are struggling to fund their savings, and it could potentially be less tax-efficient than holding diversified investments in your portfolio.

One major drawback of the Yield approach is that users can feel pressured to buy lower quality investments that offer higher yields when interest rates are low because they rely on the yield to meet fixed expenses. This could set the stage for major loss of principal in a recession or other economic reversal.

The Total Return Approach to Investing for Retirement

Total return investing prioritizes striking a balance in your portfolio. In theory, this approach allows you to pursue income during retirement as well as asset appreciation. This can help to sustain you throughout retirement - and possibly even grow your wealth during retirement in order to leave a legacy behind through your estate plan.

The goal is “growth with income”.

Total return investing does this by allocating your retirement savings in a traditionally diversified portfolio. Many mutual fund families - like Vanguard and Dimensional Fund Advisors - support the total return approach to retirement investing.

This is, in large part, because it’s a simple drawdown strategy that’s relatively easy for retirees to follow. It is tax-efficient, low-maintenance, and safeguards you against market volatility and risk as you near retirement.

Comparing yield and total return strategies.
Comparing yield and total return strategies.

Why We Believe in Total Return

Total return prioritizes both asset appreciation and protecting your principal to create a fixed income during retirement - and to extend your gains to effectively plan for longevity.

Although it doesn’t fully protect you against market risk, it does help you to extend the life of your savings and continue to draw down your portfolio for a longer period of time. This is especially important as lifespans continue to grow, and people are starting to look at potentially retiring earlier or pursuing more vibrant, active, and (in some cases) expensive lifestyles during their years as a retiree.

One important benefit of the total return investing strategy is that it allows you to diversify your investments. This gives investors the flexibility to adjust their portfolio based on current market changes, which may help mitigate the impact of risk while also reducing the impact of taxes on your investment gains and income throughout retirement.

However, it’s important to note that total return investing isn’t necessarily about “chasing” a return on your investments. You can still invest in passively traded funds with a long-term strategy while still pursuing a total return investing strategy.

In fact, that’s exactly what we focus on at Covenant Wealth Advisors. A combination of a diversified portfolio and passively managed investments via index funds can often be the ideal solution for investors who want to conservatively grow their retirement savings, but don’t want the risk that comes with speculative investing strategies or day trading.

Working With a Financial Planner to Develop a Strategy For You

Developing your own investment strategy as you draw closer to retirement can feel stressful. The yield and the total return approach are two of the most popular investing approaches available to pre-retirees working to grow their nest egg - but they’re far from your only options.

It’s easy to fall down the research rabbit hole and suddenly feel overwhelmed with panic at the idea of trying to pick an investing strategy that works best for you - and that’s before you even begin to consider what types of investments need to make up your portfolio if you want to pursue a particular strategy.

Working with a financial planner who has spent years honing their investment philosophy, who can help to tailor a plan to your unique financial needs, is one way you can reduce your anxiety and set yourself up for success during retirement.

Are you ready to get started? Schedule a consultation today. Our team would love to help you start preparing your retirement plan today!


Mark Fonville, CFP®

Mark has over 18 years of experience helping individuals and families invest and plan for retirement. He is a CERTIFIED FINANCIAL PLANNER™ and President of Covenant Wealth Advisors.


Disclosures: Covenant Wealth Advisors is a registered investment advisor. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital.The views and opinions expressed in this content are as of the date of the posting, are subject to change based on market and other conditions.

This content contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Please note that nothing in this content should be construed as an offer to sell or the solicitation of an offer to purchase an interest in any security or separate account.

Nothing is intended to be, and you should not consider anything to be, investment, accounting, tax or legal advice. If you would like accounting, tax or legal advice, you should consult with your own accountants, or attorneys regarding your individual circumstances and needs. No advice may be rendered by Covenant Wealth Advisors unless a client service agreement is in place.

Registration of an investment advisor does not imply a certain level of skill or training.


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