In The Kelly Letter Income Sig forum, JP asked in “Income Sig Distributions” what he should do with distributions before he needs them:
I’m planning to start the Income Sig plan since I’m nearing retirement.
I understand that distributions and profit skimming will be transferred to SVOL, where I can withdraw funds for living expenses. I don’t anticipate needing to withdraw any money from the plan for the next 3 to 5 years.
Should I continue moving money to SVOL, keeping it there to grow until I need it? Or should I simply do the quarterly rebalancing and only transfer funds to SVOL when I’m ready to make withdrawals from the plan?
Move the money into the repository account, where it will buy shares of SVOL and reinvest distributions.
You’re starting on a good schedule, giving your repository account time to bulk up before you need it. Ideally, when the time comes to draw from it, you’ll have a well-prepared repository account ready to cover your monthly needs and support you through down markets when Income Sig may not generate a profit skim. Dry spells are inevitable in the stock market, but a fully stocked repository account will carry you through them.
From “Is Income Sig Too Good To Be True?” in Note 44 sent 11/10/24:
Income Sig does not make steady payments, but sporadic ones that are heavily influenced by large profit skims from time to time. Averaging makes this appear steady, but it’s not.
Even in a plan that produces an overall bountiful income, it’s possible to go through lean periods when it seems that the plan is not working. For these periods, careful financial management is necessary along with a well-stocked repository account. “Hang in there, honey, we’ll eat in the future” is not a recommended approach. …
There’s also a chance the market could make it fine for you to rely on Income Sig from the moment you retire — even if that’s when you started the plan. If TQQQ rose steadily for two years or so after you began the plan, you’d be able to bulk up your repository account while also taking income. We can’t foresee the market’s path, however, which is why it’s best to start the plan in advance of needing funds.
I hope this helps!
