Same $2 million, two very different retirement portfolios: Adam Dawes reveals his best ideas
From EX20 and BHP to Telstra and VAF, Adam Dawes reveals how he'd invest $2 million for disengaged retirees and those who work part time.
Add us as a preferred Google source
Having $2 million to invest in retirement is an enviable position. But how you invest that money could look very different depending on whether you're still earning an income or have walked away from working life altogether.
Last month, my colleague Anna Dadic sat down with Adam Dawes, Senior Financial Adviser at Shaw and Partners, to explore how he'd invest $2 million for two retirement personalities:
- The Stayers, who remain closely connected to their careers and keep earning a salary.
- The Leavers, who make a clean break from working life.
The response was overwhelming. Readers wanted to see what he'd do for the other two personalities:
- The Blenders, who combine part-time work with retirement, balancing continued income with more leisure time.
- The Disengaged, who leave working life behind but have given relatively little thought to their retirement plans.
So, we've brought Dawes back to finish the job. In the interview above, he reveals how he'd invest $2 million for each retirement personality, and why their different circumstances call for very different portfolios.
Note: I strongly recommend downloading both portfolios and watching the interview to hear Adam bring his investment strategies to life, with excellent insights into how each portfolio reflects the different retirement personalities. You can also read the written summary below.
The portfolios are illustrative examples, not personal financial advice. Investment decisions should reflect your individual circumstances, objectives and risk tolerance.
#1 – The Blenders: A pay cheque buys you more growth
Blenders are retirees who haven't quite retired. They've stepped away from full-time employment but continue working part-time, consulting or using their professional expertise while enjoying more leisure time.
Dawes says this describes many of his clients, and it's a financially attractive position.
Consider someone with a $2 million portfolio who wants to spend $100,000 a year. Without employment income, they would need to draw 5% of their portfolio annually.
But if they're earning $60,000 from part-time work, their portfolio only needs to contribute $40,000, equivalent to a 2% withdrawal rate.
That difference can be significant over a retirement lasting 20 or 30 years, particularly if it allows more capital to remain invested.
"I think the blenders are the ones that are really looking for still keeping in the workforce and still getting up with a purpose, but also then trying to enjoy some of a retirement or a slowdown in their working life," Dawes says.
The Blender's $2m portfolio
For our first investor, a 60-year-old Blender with $2 million, a mortgage-free home and plans to work part-time for another decade, Dawes favours 70% growth assets and 30% defensive assets.
"They've got that pay cheque coming in, so we can be a little bit more growth orientated," Dawes explains.
His key selections include:
- Vanguard International Shares ETF (ASX: VGS): The portfolio's largest holding, providing global diversification and long-term growth to help replenish retirement withdrawals.
- Betashares Australian Ex-20 ETF (ASX: EX20): Core Australian equities exposure, targeting growth opportunities beyond the 20 largest companies. Dawes notes it can be swapped for the Betashares Australia 200 ETF (ASX: A200) depending on a client's existing holdings and potential overlaps.
- Macquarie (MQG), Wesfarmers (WES) and BHP (ASX: BHP): Satellite positions offering a mix of quality businesses, capital growth potential and franked dividend income.
The remaining $600,000 is spread across three fixed-income and cash ETFs from Betashares and Vanguard.
"People might say that that's far too much in cash and that's totally up to them, but I do like the ability to have some dry powder when there's uneasiness in the market," he says.
Blenders are arguably among the best-positioned retirees.
With part-time income helping cover living expenses, they can keep portfolio withdrawals to a minimum, allowing their growth investments to compound and potentially replenish capital. Meanwhile, a substantial cash buffer provides liquidity, attractive yields given where bond rates are currently, and flexibility during market downturns.
#2 – The Disengaged: When simplicity and income take priority
For our second investor, the starting balance remains $2 million, but without ongoing employment income, Dawes favours a more defensive 50% growth and 50% defensive allocation.
Disengaged retirees are those who, as Dawes puts it, "don't have any kind of a plan at all". They may also have limited experience navigating market volatility, making them less comfortable with sharp corrections.
"They just want to get their dividends. They don't want to have too much volatility."
The DISENGAGED'S $2m portfolio
Importantly, Dawes also favours a greater emphasis on high yields - even within the growth allocation. Unlike Stayers and Blenders, who can supplement their investment returns with employment income, Disengaged retirees are relying on their portfolios entirely for their golden years.
His key selections include:
- Betashares Australian Ex-20 ETF (ASX: EX20): Core Australian equities exposure, although Dawes suggests the Vanguard Australian Shares High Yield ETF (ASX: VHY) as an alternative for investors seeking higher dividend income.
- Vanguard International Shares ETF (ASX: VGS): Global diversification and long-term capital growth potential to help preserve purchasing power throughout retirement.
- Telstra (ASX: TLS) and Woolworths (ASX: WOW): Established businesses in telecommunications and essential consumer goods, offering relatively defensive earnings which supports a more stable dividend with franking credits attached.
- Vanguard Australian Fixed Interest ETF (ASX: VAF): Part of a larger defensive allocation providing regular income, diversification and a buffer against equity market volatility.
For Disengaged retirees, the priority is making their money last without having to constantly monitor the market. A larger defensive allocation can help cushion volatility and support withdrawals, while the equity component provides income and long-term growth potential.
Still, Dawes warns even a relatively simple portfolio needs a clear spending plan and regular reviews to ensure it remains fit for purpose.
What have we learned from this exercise?
This has been a fascinating exercise, and I hope it has demonstrated that four retirees of the same age, with the same $2 million portfolio, can require very different investment strategies.
As Dawes puts it:
"It's not really about the portfolio, it's about your personality and what you're doing to build for that retirement."
Stayers and Blenders generally have greater flexibility to pursue growth, supported by employment income that can help them ride out market downturns.
Leavers and Disengaged retirees, meanwhile, rely more heavily on their investments to fund their lifestyles, making reliable cash flow, capital preservation and managing volatility particularly important.
But even the seemingly well-positioned Blenders face risks that aren't immediately obvious.
In the full interview, Dawes also explains:
- Why working part-time could make a bigger difference to your retirement than chasing higher investment returns
- The biggest financial mistake Blenders make when planning their retirement
- Why having $2 million doesn't necessarily mean you're financially prepared to retire
- How Disengaged retirees can build a financial plan, even if they've left it late
- Why retirement portfolios need to evolve as your circumstances change
- And finally, which retirement personalities Adam Dawes and I identify with. Are we Stayers, Leavers, Blenders or Disengaged?
Let me know in the comments if you have any feedback or questions on the portfolios, and if there are other scenarios you'd like Adam to cover.
Never miss an update
Enjoy this wire? Hit the ‘like’ button to let us know.
Stay up to date with my current content by
following me below and you’ll be notified every time I post a wire
I have over 15 years’ experience covering financial markets and property, with a particular interest in ETFs and personal finance. I split my time between Australia and Canada to bring a global perspective to my work.
........
Livewire gives readers access to information and educational content provided by financial services professionals and companies ("Livewire Contributors"). Livewire does not operate under an Australian financial services licence and relies on the exemption available under section 911A(2)(eb) of the Corporations Act 2001 (Cth) in respect of any advice given. Any advice on this site is general in nature and does not take into consideration your objectives, financial situation or needs. Before making a decision please consider these and any relevant Product Disclosure Statement. Livewire has commercial relationships with some Livewire Contributors.
4 topics
I have over 15 years’ experience covering financial markets and property, with a particular interest in ETFs and personal finance. I split my time between Australia and Canada to bring a global perspective to my work.
Expertise
I have over 15 years’ experience covering financial markets and property, with a particular interest in ETFs and personal finance. I split my time between Australia and Canada to bring a global perspective to my work.
Expertise
Comments
Comments
Sign In or Join Free to comment
most popular
Equities
Question everything
Schroders
Buy Hold Sell
Buy Hold Sell: 5 ASX ‘stayers’ to go the distance
Livewire Markets