If you’re trying to turn your life’s savings into a durable, sleep-at-night paycheck while inflation nibbles at your purchasing power, welcome to IAUI. This is a practical blueprint—not a get-rich-quick scheme—for pairing gold’s inflation defense with reliable, double-digit cash yields to build a retirement engine that hums through market weather.
What is IAUI?
IAUI stands for Income + Anti-Inflation—Uncorrelated, Insurance.
It’s a simple portfolio lens for retirees:
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Income: Create a steady paycheck today.
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Anti-Inflation: Keep purchasing power from eroding tomorrow.
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Uncorrelated: Hold assets that zig when stocks and bonds zag.
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Insurance: Own shock absorbers that help you stay invested through drawdowns.
The IAUI core is a gold allocation—most simply accessed through a low-cost gold ETF—that acts as an anti-inflation, uncorrelated ballast. The IAUI income sleeve is a curated mix of high-yield cash-flow vehicles (think covered-call funds, closed-end funds, preferreds, BDCs, select REITs, and short-duration credit) designed to deliver reliable, preferably double-digit yields without gambling the nest egg.
IAUI isn’t about timing gold or chasing the hottest 12% yield. It’s about pairing a hard-asset hedge with disciplined income engineering, so that your withdrawal plan survives bear markets, rate cycles, and surprise inflation spikes.
Why Gold Belongs In a Retiree’s Paycheck Plan
Retirees don’t buy gold for its yield (it has none). They buy it for what it does to the portfolio’s risk math:
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Inflation hedge: Over long arcs, gold has a strong relationship with real rates and inflation expectations. When the cost of living rises or the dollar weakens, gold often provides relief.
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Crisis offset: In “left-tail” moments (currency scares, banking wobblies, geopolitical shocks), gold frequently behaves like insurance.
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Correlation benefit: Gold’s correlation to stocks and bonds is variable but often low or even negative at the exact moments you need ballast.
The practical effect for a retiree: gold helps protect your future purchasing power and reduces the chance you’re forced to sell income assets at fire-sale prices during drawdowns. It shores up the “I” and the “U/I” in IAUI.
Why Double-Digit Yield Isn’t Reckless—If You Engineer It
“Double-digit yield” sets off alarm bells for good reason: unsustainably high yields often spell danger. The IAUI method focuses on how you earn that yield:
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Structural income (option premiums in covered-call funds, asset-backed lending in BDCs, contractual cash flows in preferreds) instead of pure hype.
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Diversified sources so your “paycheck” doesn’t hinge on one sector or one fund’s distribution policy.
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Risk-aware sizing so a single cut doesn’t derail your plan.
The goal is portfolio-level yield in the 8–11% range with select sleeves generating 10–13%—not every holding needs to be (or should be) double-digit. IAUI builds a layer cake of yield where the vanilla layers (short-duration credit, preferreds) support the frosting (covered-call, BDCs, special-situation CEFs).
The IAUI Blueprint (Step-by-Step)
Step 1: Define Your “Paycheck Number”
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Monthly need (after Social Security/pensions): e.g., $4,000.
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Safety margin: 10–15% cushion.
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Required portfolio yield: If you want to avoid selling shares, a portfolio-level yield of ~8–10% on the income sleeve may cover most or all needs for many retirees.
Step 2: Choose Your Gold Anchor (10–20% of Total Portfolio)
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10% for conservative retirees with sizable pensions.
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15–20% for those without pensions or with higher inflation anxiety.
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Use a liquid, low-cost gold ETF as the core. Consider adding a small miners sleeve (2–4%) only if you can stomach volatility. The anchor is the metal exposure, not necessarily the miners.
Step 3: Construct the Income Layer Cake (40–60% of Total Portfolio)
Here’s a model mix to target a blended portfolio yield near 9–10% while spreading risk:
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Covered-Call Equity Funds (10–15%)
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Rationale: Option premiums harvested on large-cap indices or sectors can generate 7–12% distributions.
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Role: Equity-linked income with lower volatility than pure equity exposure.
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Business Development Companies—BDCs (8–12%)
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Rationale: Asset-backed loans to middle-market firms; many float with short-term rates.
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Role: Double-digit cash yield potential with credit underwriting as the key risk lever.
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Tip: Prefer internally managed and those with strong non-accrual discipline.
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Closed-End Funds—CEFs (8–12%)
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Rationale: Professional managers using leverage to amplify income (credit, infrastructure, covered calls, preferreds).
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Role: Access to specialized strategies at discounts to NAV; distribution policies vary—favor steady, well-covered payouts.
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Tip: Buy quality funds at a double-digit discount when possible and watch leverage costs.
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Preferreds & Baby Bonds (6–10%)
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Rationale: Seniority over common equity; fixed-to-float structures can mitigate rate risk.
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Role: Stabilizer sleeve; often 6–9% yields with downside protection vs. common.
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Select REITs & Infrastructure (6–10%)
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Rationale: Tangible assets with rent or toll-like cash flows; some subsectors can deliver 8–12% yields.
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Role: Real-asset income; watch balance sheet health and lease duration.
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Short-Duration Credit (5–10%)
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Rationale: Lower interest-rate sensitivity; high-quality corporate/agency exposure.
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Role: Liquidity buffer; dry powder to rebalance when risk assets dip.
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You won’t own everything above. Choose three to five categories you understand and can monitor, then size them thoughtfully.
Step 4: The Stability Sleeve (20–40% of Total Portfolio)
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Treasury ladder (1–5 years) for principal stability.
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TIPS if you want explicit inflation protection.
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Cash & ultra-short for optionality and emergency liquidity.
This sleeve keeps your plan on track if high-yield risk markets wobble. Think of it as your sleep insurance.
Step 5: Rebalancing & Distribution Policy
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Quarterly check-ins to rebalance within bands (e.g., gold 12–18% allowed; income sleeve 45–55%).
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Distribution rule: Let the income sleeve distributions fund your spending first. If you need more, tap the stability sleeve; avoid selling high-yield positions into weakness unless thesis changed.
A Sample IAUI Portfolio (for Illustration Only)
Assume a $1,000,000 portfolio and a target $90,000/year ($7,500/month) gross distribution goal.
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Gold Anchor — 15% ($150,000)
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Core gold ETF: $120,000
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Optional miners ETF: $30,000 (trim or omit if volatility stresses you)
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Income Layer — 50% ($500,000)
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Covered-call funds: $125,000 (target 8–11% distribution)
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BDCs: $125,000 (target 10–13%)
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CEFs (credit/infrastructure/preferreds): $125,000 (target 9–12%)
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Preferreds/Baby Bonds: $75,000 (target 7–9%)
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Short-duration credit: $50,000 (target 4–6%)
Blended sleeve yield (illustrative): ~9.8% → ≈ $49,000
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Stability Sleeve — 35% ($350,000)
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Treasury ladder & T-Bills: $200,000 (laddered 6–36 months)
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TIPS: $100,000
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Cash/Ultra-short: $50,000
Expected income (illustrative): ~$13,000–$16,000
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Total projected cash flow (illustrative):
Income sleeve ($49k) + stability sleeve ($14k midpoint) ≈ $63,000.
If your goal is $90,000, you can either:
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Increase income sleeve toward 55–60% if you accept more risk,
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Add selective higher-yield CEFs/BDCs,
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Or top up the difference by orderly redemptions from the stability sleeve during good markets.
The point: IAUI gives you knobs to turn (sizing, yield mix, stability) instead of forcing you to sell equities in a bear market at the worst time.
Risk Controls: The Four Guardrails
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Coverage > Headline Yield
A 12% headline yield with weak coverage is a trap. Prioritize funds with distribution coverage >90%, sensible leverage, and transparent policies. -
Rate & Credit Diversification
Blend floating-rate (BDCs), option-income (covered calls), and fixed-to-float preferreds. Avoid concentration in long-duration credit during rising-rate regimes. -
Discount Discipline for CEFs
Favor discounts to NAV and avoid buying premium CEFs without a clear reason. Discounts offer a margin of safety and potential alpha if they revert. -
Position Sizing
Cap any single fund at 3–5% of the total portfolio; any single category at 12–15%. Diversification is your best defense against a distribution cut.
How IAUI Handles Real-World Stress
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Inflation Spike:
Gold tends to shine; TIPS adjust; floating-rate BDCs may hold up; long-duration bonds struggle. Your paycheck persists due to diversified income sources. -
Recession:
Credit spreads widen; some BDCs/CEFs face pressure. Stability sleeve and gold buffer the drawdown. Covered-call funds benefit from volatility via option premiums. -
Rate Cuts After a Hike Cycle:
Preferreds and long credit reprice higher; some BDC yields compress, but asset values may rise. Covered-call funds may distribute less (lower implied volatility) but appreciate. -
Left-Tail Event (Geopolitical/Currency):
Gold and Treasuries typically act as insurance. You can fund withdrawals from the stability sleeve while letting income assets recover.
Withdrawal Strategy: Paycheck Engineering
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Waterfall
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Use income sleeve distributions first.
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If insufficient, tap cash & short-duration.
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If still needed, sell Treasury ladder rungs maturing soon.
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Avoid forced selling of high-yield positions during drawdowns.
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Sequence-of-Returns Defense
With IAUI, the gold + stability sleeves are your buffer in the first 5–7 years of retirement—a critical window for avoiding permanent impairment. -
Dynamic Spend Rule
Consider a “guardrails” approach (e.g., raise spending 2–3% after good years, keep flat after poor years). Your paycheck stays livable without stressing the portfolio.
Taxes & Account Placement (High-Level)
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Tax-Deferred Accounts (IRAs, 401(k)s): Great homes for high-distribution CEFs/BDCs/covered-call funds to defer ordinary income.
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Taxable Accounts: Favor qualified-dividend equities, muni CEFs, and long-term holdings for lower tax drag. Be mindful of fund return-of-capital (ROC)—it’s not automatically good or bad; it depends on whether ROC is constructive (defers tax, supports NAV) or destructive (erodes NAV).
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Gold: Many gold ETFs are taxed at collectibles rates in taxable accounts; IRA placement can simplify the picture. Speak with a tax professional for specifics.
Common Mistakes to Avoid
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Chasing the Highest Yield
A 15% “miracle” fund with poor coverage is a future disappointment. IAUI maximizes durability, not headlines. -
All-In on One Strategy
Covered-call funds alone won’t solve everything; neither will BDCs. Blend them. Diversification is the secret sauce. -
Ignoring Leverage Costs in CEFs
Rising short rates can squeeze leveraged funds. Favor managers who proactively term out financing or cap leverage. -
Forgetting Liquidity
Keep 6–12 months of withdrawals in cash/ultra-short so market hiccups don’t force sales. -
Letting the Gold Tail Wag the Dog
Gold is an anchor, not a religion. Keep it to 10–20% (most retirees), rebalance on both rallies and dips.
A 30-Minute IAUI Setup Checklist
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List monthly spending needs and subtract guaranteed income (SS/pension).
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Choose target gold anchor (10–20%) and buy in two or three tranches to average in.
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Select 3–5 income categories you understand (covered-call, BDC, CEF, preferreds, REITs, short-duration credit).
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Build a position-sizing map (3–5% max per fund; 12–15% per category).
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Create a Treasury/TIPS ladder for the stability sleeve.
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Set rebalancing bands and a quarterly review date.
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Draft a distribution policy (income first, stability next, avoid selling risk assets in stress).
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Document a sell discipline (coverage deteriorates, leverage spikes, NAV erodes, credit quality slips).
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Automate dividend reinvestment OFF for income sleeve if you’re drawing the cash; leave ON for gold/stability sleeves if you’re still accumulating.
Frequently Asked “But What If…?”
“What if gold underperforms for years?”
That’s fine; its job isn’t to win—it’s to hedge. The income sleeve does the heavy lifting for your paycheck. Rebalance periodically so you’re always trimming winners and topping up laggards.
“What if yields fall across the board?”
Covered-call income tracks volatility; credit yields track spreads and rates. If yields compress because markets heal, asset prices may be up—your withdrawal rate can lean on stability sleeve gains and selective trims.
“What if a fund cuts its distribution?”
This is why we avoid concentration. One cut among ten positions barely dents the portfolio check. Use your quarterly review to replace laggards with better-covered payers.
“Can I do IAUI if my risk tolerance is low?”
Yes—dial the income sleeve to 40–45% and push the stability sleeve to 40–45%, keeping gold 10–15%. Your payout will be lower, but the sleep factor rises.
Advanced IAUI Tactics (Optional)
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Option-Overlay DIY:
If you’re comfortable, write covered calls on quality dividend stocks you already own to boost cash flow 2–4% annually while trimming upside volatility. -
Barbell the BDC Sleeve:
Pair a conservative, internally managed BDC with a small satellite allocation to a more opportunistic lender. The barbell keeps average quality high while preserving upside. -
Discount Rotation in CEFs:
Periodically scan for funds where discounts widened far beyond historical averages without a deterioration in coverage. Rotations can add 1–2% alpha. -
Fixed-to-Float Preferred Ladder:
Stagger resets across the next 3–5 years to reduce rate timing risk and maintain attractive coupons as benchmarks change.
Putting It All Together
The genius of IAUI is its balance:
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Gold protects purchasing power and steadies the ride when headlines scream.
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Income sleeves generate the paycheck from multiple, diversified sources—some equity-linked, some credit-based, some hybrid.
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The stability sleeve lets you decouple spending from market mood, protecting your sequence of returns.
Instead of arguing whether gold is “better” than bonds, or whether a 10% yield is “too risky,” IAUI says: use each for what it does best—and size it so no single answer has to be perfect.
A Final Word on Mindset
Retirement investing isn’t a batting average game; it’s a staying-invested game. The IAUI framework deliberately mixes return engines (income) with risk brakes (gold, Treasuries/TIPS), so you can keep collecting checks through the messy middle of markets.
Could you earn more by going all-equity or timing gold? Maybe. But the point of IAUI isn’t victory laps. It’s durability: a portfolio that keeps your lifestyle funded, even when the world throws curveballs.
If you want the dream combo—gold for resilience and double-digit yield for a dependable paycheck—IAUI gives you a clear, repeatable playbook to build it, monitor it, and live off it with confidence.
Quick Summary (TL;DR)
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IAUI = Income + Anti-Inflation (gold) + Uncorrelated/Insurance.
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Gold (10–20%): Inflation hedge and crisis ballast.
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Income mix (40–60%): Covered-call funds, BDCs, CEFs, preferreds, select REITs, short-duration credit—target portfolio-level 8–10%, with sleeves in the 10–13% range.
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Stability (20–40%): Treasury ladder, TIPS, cash for sequence-of-returns defense.
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Rules: Coverage over headline yield; diversify income sources; use CEF discounts; strict position sizing; quarterly rebalance.
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Outcome: A steadier paycheck that keeps up with life’s rising price tag—without betting the farm on any single idea.
This article is for educational purposes and not individualized financial, tax, or investment advice. Consider your personal situation or consult a fiduciary advisor before implementing any strategy.