The difference between your total income and your total expenses is your net savings. If this is a negative (as it is for many affluent retirees), you'll need more cash flow from your investment portfolio to ensure you're able to cover all of your expenses. The remainder of this guide primarily focuses on generating cash flow from your portfolio to bridge this gap. But before we get into specific strategies, we discuss some important principles of retirement investing.
Income Versus Cash Flow
It may seem pedantic, but there is a key distinction between income and cash flow. Income is money received, and cash flow is money withdrawn. For example, dividends and bond coupon payments are indeed considered income - you report them as such on your tax returns. These are two completely acceptable sources of funds. But if you rely on them solely, you could be selling yourself short. On the other hand, selling a security also generates cash flow. When you sell a security, the difference between what you put in and what you take out is considered a capital gain (or loss).
Not, cash flow withdrawn from your portfolio isn't a bad thing - and can be a very important component of your overall retirement strategy.
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