Income you don't have to sell assets to generate is the thing that lets you sleep through a bear market. This adds up what a mix of dividends, bonds and property trusts actually pays you, scores how dependable it is, and tests what happens when a recession cuts it.
Dividends get cut, REIT distributions get cut, bonds keep paying. Across 8,000 simulated years:
There's a real difference between spending the income your investments produce and selling bits of them to live on.
If your investments pay you enough to live on, a market fall is an inconvenience. Prices drop, but the dividends and interest keep arriving, you keep eating, and you wait it out. If instead you're selling units every quarter to cover the bills, that same fall means selling more units for the same money — permanently shrinking the thing that's supposed to support you.
That's the whole idea here: work out what your holdings actually pay you each month, and how dependable those payments are when things get difficult.
Susan has $900,000 invested and spends $62,000 a year. Her pension covers $24,000, so her portfolio needs to find the other $38,000.
Her mix — dividend shares, government and corporate bonds, some property trusts and a slice of growth shares — throws off about $33,000 a year in distributions and interest. That's roughly 87% of what she needs, so in a normal year she sells only about $5,000 of assets.
Then she runs the bad-year test. In a recession, dividends get cut and property distributions get cut harder; her income drops to around $28,000 and the shortfall triples. So she keeps two years of that gap in cash. Now even a bad year requires no selling at all — and that, rather than the yield itself, is what lets her ignore the market.
The score combines three things, and it's worth knowing which one is dragging it down:
The obvious response to a low score is to buy higher-yielding things. This is usually a mistake, and an expensive one. In investing, an unusually high yield is normally the market pricing in a cut that hasn't happened yet — you're not being handed extra income, you're being warned. Chasing yield tends to lower the reliability score while raising the coverage one, which is a poor trade.
The better levers are spreading the income across more sources, holding a cash buffer for the bad years, and covering more of your essential spending with genuinely guaranteed income like a pension or annuity.
General information only — not financial advice, and not a recommendation of any asset class. Yields are what you enter; they are not guaranteed, and a high headline yield is often a warning rather than an opportunity. Chasing yield by concentrating in high-payout sectors introduces its own risks. The stress model applies simple, fixed cuts by asset type and does not attempt to reproduce any particular historical episode.