Living successfully on guaranteed income could mean you have the risk capacity to allocate more of your portfolio to equities. (However, keep in mind your risk tolerance!)
One question we get often with retirees who will be able to live comfortably on their guaranteed income (i.e. Social Security and pension income) is how they should structure their portfolio. Ultimately, it depends.
If you are in this position, we encourage you to spend some time really considering your risk tolerance, risk capacity, time horizon, cash flow, and overall comfortability with market fluctuations.
If you determine yourself to have a higher risk tolerance, you could consider using your guaranteed income as a “bond/fixed income proxy” in your overall portfolio allocation. In other words, creating a portfolio that is allocated higher to equities, because your guaranteed income outside of your investment portfolio serves as allocation to bonds/fixed income.
However, over the history of financial markets, there have been periods where stocks outperform bonds and vice versa.
Here are some clips that provide additional context for the role that bonds can play within a balanced portfolio.
Video: How Should People With a Pension Think About Retirement?