When building a retirement portfolio, my focus would be slightly different than when investing earlier in life. Growth would still matter, but stability and income would become much more important.
Rather than concentrating everything in one sector, I would spread the portfolio across several parts of the market and combine that with broad exchange-traded funds (ETFs).
Here's how I would do it.
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Half in reliable ASX dividend shares
For the first half of the portfolio, I would focus on dependable Australian companies with a history of generating strong cash flow and paying dividends.
Infrastructure would be one area I would want exposure to. Businesses that own long-life assets such as toll roads or energy infrastructure often produce predictable revenue streams, which can support stable dividends. Companies like Transurban Group (ASX: TCL) and APA Group (ASX: APA) are examples of the type of infrastructure exposure that can play a role in income-focused portfolios.
I would also want exposure to defensive consumer businesses. Supermarkets and essential retail tend to hold up relatively well during economic downturns because households continue spending on everyday goods. Businesses such as Woolworths Group Ltd (ASX: WOW) fall into this category and can add stability to a portfolio.
Banks would likely form another part of the mix. Australian banks have historically paid attractive fully franked dividends and remain some of the largest income generators on the ASX. Institutions such as Commonwealth Bank of Australia (ASX: CBA) and Macquarie Group Ltd (ASX: MQG) often play a role in income-focused portfolios for that reason.
I would also include exposure to the resources sector for balance. Mining companies can be cyclical, but the major diversified miners have historically returned large amounts of cash to shareholders when commodity markets are strong. Companies like BHP Group Ltd (ASX: BHP) or Rio Tinto Ltd (ASX: RIO) could provide that element of the portfolio.
Together, a diversified group of high-quality dividend stocks across these sectors could form the foundation of the portfolio's income.
Half in diversified ETFs
The remaining half of the retirement portfolio I would allocate to broad ETFs.
This would help diversify the portfolio beyond Australia and reduce reliance on any single company or sector. It also provides exposure to hundreds or even thousands of businesses across global markets.
One option could be the VanEck MSCI International Quality ETF (ASX: QUAL), which focuses on global companies with strong balance sheets, high returns on equity, and stable earnings growth.
Another ETF that could complement this is the iShares S&P 500 AUD ETF (ASX: IVV), which provides exposure to the 500 largest companies on Wall Street.
Adding ETFs like these would bring global diversification to the portfolio while still allowing the Australian dividend stocks to do most of the heavy lifting on income.
Retirement income
Based on the above, I would be expecting a dividend yield in the region of 3% to 4% from this ASX retirement portfolio.
That means with $1 million invested, I would expect to be receiving income of $30,000 to $40,000 each year.
But it shouldn't stop there. The way this portfolio is set up, I would expect my income to increase each year that it is operational.
Foolish takeaway
If I were building a $1 million ASX retirement portfolio, my focus would be on balance.
Roughly half could be invested in reliable Australian dividend shares across sectors such as infrastructure, banking, consumer staples, and resources.
The other half could sit in diversified ETFs to provide global exposure and long-term growth.
Together, that type of portfolio could potentially deliver an income stream around the 3% to 4% mark while remaining diversified enough to weather different market conditions over time.
