If you’ve spent your career building a business, you already understand cash flow is everything. You don’t run a company by hoping the value of your equipment goes up every year — you run it by making sure the money coming in covers the money going out. Retirement income should work the same way.
Yet most retirement portfolios aren’t built with that discipline. They’re built to grow, and growth is treated as the plan for paying the bills. That works fine until the year the market doesn’t cooperate — and for a business owner who has already lived through a few down cycles, that’s not hypothetical, it’s a memory.
There’s a more direct way to think about retirement income, and it comes from a place many business owners are already comfortable with: lending.
Where You Sit Matters: The Case for Senior Secured
Not all bondholders are treated equally when something goes wrong. Being senior secured means you’re first in line to be repaid if a borrower runs into trouble — ahead of subordinated debt, ahead of equity holders, ahead of everyone else with a claim on the same collateral. It’s the difference between being the bank holding the mortgage and being a shareholder hoping for the best.
For a retirement income strategy, that priority matters more than most people realize. It’s the structural feature that lets you pursue income without stacking on additional structural risk to get there.
Yield is the primary Driver of Return
From a return standpoint, the yield tends to tell you most of what you need to know upfront. There’s a high correlation between a bond’s yield to maturity at the time you purchase, and the total return the investment generates over its life. The yield isn’t just a number on a page; it’s a reasonable preview of the outcome. That makes bonds one of the more predictable building blocks available for an income plan.
Two Markets, Two Different Return Profiles
Senior secured lending is available to investors in two forms, and each comes with a different risk-and-return trade-off:
• Liquid markets — publicly traded bonds and loans that can be bought and sold on an exchange. Reasonable return expectations here run in the 4–7% range. The trade-off for that liquidity is a lower ceiling on yield.
• Illiquid markets — privately negotiated loans that can’t be traded on a public exchange. As an investor, there should be additional compensation for giving up daily liquidity. Reasonable return expectations can be higher, typically in the 8–14% range.
Business owners tend to grasp this trade-off, because it mirrors decisions you’ve likely already made in your own business — accepting less flexibility in exchange for a better rate, or paying up for the ability to move quickly. The same logic applies to your investment portfolio.
Blending Both to Build a Real Income Plan
The goal isn’t to pick one market over the other — it’s to combine liquid and illiquid senior secured lending deliberately, in proportions built around a specific objective: covering your annual living expenses with the income your portfolio generates, without depending on capital appreciation to make up the difference.
This post is for general educational purposes only and does not constitute investment advice or an offer to buy or sell any security. Yield expectations discussed are illustrative and not guaranteed; all investing involves risk, including loss of principal. Please consult with your advisor before making any investment decision.