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By Tom Worthington
This article is published on: 12th October 2026
Why consistency matters when your investments pay the bills
If you are approaching retirement, or already using your investments to top up your retirement income, the returns you receive serve a critically important purpose – helping to provide financial security for the rest of your life.
That might mean the weekly shop, flights to see family or the freedom to say yes to a holiday without worrying about what it does to next year’s income. This is the reader I have in mind: someone who has worked hard to build savings and now wants to understand how to make them last.
My career has taken me from advising expatriates to working in investment management, and back to personal advice here in Mallorca. Those roles look at the same money from different angles. A manager considers how a portfolio is invested; an adviser also has to consider what happens when its owner needs to spend it.
For me, that connection is the important part. A good investment on paper still has to fit the person living with it. If the income is needed for everyday expenses, the bumps along the way deserve as much attention as the headline return.
Suppose you invest €300,000 for ten years and take nothing out. One hypothetical investment earns 7% every year. Another alternates between gaining 20% and losing 5%, giving it a simple average annual return of 7.5%.
The second sounds better. Yet the steady 7% finishes at roughly €590,145, while the alternating returns produce about €577,624. The supposedly lower return leaves you approximately €12,521 better off.
The reason is that each year’s gain or loss applies to a different balance. A 20% gain followed by a 5% fall turns €100 into €114, not €115. Repeat that pattern and the difference builds up.
This is a mathematical illustration, not an investment offer. No market-based fund can promise 7% every year. The figures exclude fees and taxes, and neither percentage is a forecast.
There is also a distinction worth keeping in mind: a published compound annual return already allows for those ups and downs.
If one investment genuinely compounded at 9% and another at 6% over the same period, with nothing paid in or withdrawn, the 9% investment of course grows more. My point is to look carefully at what the quoted number actually measures.
Now imagine a couple retiring to Mallorca with €300,000 in savings. Their pension income covers most of the essentials, but they want another €15,000 a year from savings for the rest. This is a hypothetical situation, rather than a client case study, but consider this important point.
They might see €15,000 additional annual income as €1,250 a month towards enjoying retirement. Their investment portfolio, however, has to support these payments through difficult years as well as good ones. Their living expenses will not reduce just because markets have fallen.
Using the same €300,000 starting balance, suppose €15,000 is withdrawn at the end of each year. If the investment falls 20% in year one and gains 30% in year two, €277,500 remains after both withdrawals. Reverse those returns, with the gain first, and €285,000 remains.
That is a €7,500 difference despite identical percentage returns and the same €30,000 taken out. Without withdrawals, both would finish at €312,000.
The technical name for this exposure to uncertainty is sequence-of-returns risk. In everyday language, taking money out after a market fall leaves less invested to benefit from the recovery. The timing of bad years can therefore matter a great deal once your savings are being used to pay the bills.
For our hypothetical couple, I would want to explore how much of that €15,000 they really need, what could be reduced temporarily, and what other accessible savings they have. Those answers help shape a withdrawal plan that is more practical and valuable than an unrealistically optimistic approach to retirement.
I am not looking for a manager who claims markets will never fall. I want an approach I understand and can explain: what the portfolio owns, why it owns it, how risk is managed and what it costs.
Consistency means sticking to a sensible investment process through difficult conditions. It includes spreading investments appropriately, keeping enough liquidity to meet withdrawals and avoiding risks that do not fit the client’s circumstances. It does not mean avoiding every loss or guaranteeing an income.
For clients of mine, the question I want an investment plan to answer is whether it supports the life they want to lead. Someone investing for twenty years without needing the money has different choices from someone drawing on it next month. The same fund could suit one and be inappropriate for the other.
That is also why I would not select a manager on last year’s performance alone. I want to understand how the strategy performed in difficult periods, whether the risk/reward balance is appropriate, and what the investor keeps after charges.
A regular payment into your bank account can feel reassuring. But receiving 5% a year does not necessarily mean your investment has earned 5%. Some of the payment may be your own capital coming back to you.
There is nothing automatically wrong with spending capital in retirement. You may have saved it for exactly that purpose. What matters is understanding the effect on the money remaining and how long it may need to last.
I think of it like a wine rack: taking out a bottle every Friday becomes a routine, but it does not mean the rack is producing wine.
With investments, that distinction can be less obvious. I want you to understand where your income comes from, how charges affect it and what happens if returns disappoint. A withdrawal plan also needs reviewing as your spending pattern, health or family circumstances change.
Living in Mallorca gives me a personal connection to the practical side of advice for people abroad. The plan has to work where you live and in the currency you spend. If your pension arrives in pounds but your bills are in euros, exchange rates will affect how far your income goes.
There is a human side to investment risk too. It is easy to say you are comfortable with a fall when markets are rising. It may feel different when the valuation drops and you still need to pay your bills next month.
I would rather explore that before the difficult year arrives. How would a fall affect your spending? Would you feel pressure to sell investments? Could accessible reserves give you breathing space? The answers matter more than a reassuring label on a questionnaire.
Being too cautious has its own cost. Cash can provide useful security for nearer-term spending, but inflation reduces what it buys over time. Retirement may last decades, so the plan needs to balance today’s comfort with the growth that may be needed later.
The first question I ask is what you need your money to do. Cover essential bills? Fund travel? Help children? Leave something behind? Each answer affects how much uncertainty you can afford and how the investments should be managed.
From there, we can consider suitable investments, costs, accessible reserves and a realistic withdrawal level. Those pieces need to work together, with room to adjust when life changes. The €15,000 in the illustration is not a recommendation that everyone can safely withdraw 5%.
You do not need to become an investment specialist to have that conversation. You should be able to understand the plan, the risks involved and why it suits you.
That is what I want personal advice to achieve. You worked hard to build your savings. The aim is to help you use them with greater confidence, leaving more time to enjoy the life you have worked towards.
