Daily Gains Letter

retirement income


How to Profit from Aging Baby Boomers and Real Estate

By for Daily Gains Letter | Feb 22, 2013

220213_DL_whitefootA REIT (real estate investment trust) is a company that owns and, for the most part, operates income-producing real estate. REITs are a great way for individuals to invest in real estate without actually having to own real estate.

It’s also a great way to generate income from guaranteed dividends. To be a REIT, a company must by law distribute at least 90% of its taxable income to shareholders annually in the form of dividends.

REITs pay out almost all of their taxable income to shareholders, so investors have historically looked to REITs for reliable and significant dividends—which are typically four-times higher than those of other stocks, on average.

Because REITs pay out at least 100% of their taxable income to investors, they don’t pay any corporate tax. Most states also don’t require REITs to pay state or income tax. Taxes are paid by shareholders on dividends and any capital gains.

Having said that, investing in a REIT only makes sense if the real estate market is doing well. While the U.S. housing market is beginning to heat up, the rally is still young. And many investors are still justifiably wary of stepping back into real estate after seeing home values evaporate following the Great Recession.

Because REITs operate commercial properties in every major metropolitan area across the country, it’s important to find which kind of REIT is best suited to your investing needs.

Overall, REITs outperform the markets. Between 1971 and 2010, publicly traded REITs provided compound annual total returns of 12%. During that same time frame, the S&P 500 returned 10%, the NASDAQ returned 8.4%, and the Dow … Read More


Why You May Want to Increase Your Exposure to Stocks After Retirement

By for Daily Gains Letter | Feb 21, 2013

210213_DL_whitefootLife doesn’t stop at retirement; neither should your investment strategies.

Retirement planning isn’t just about tucking money away for retirement and hoping it lasts. It’s about replacing your main source of income once you retire, with other sources of income; preferably with those that continue to generate income.

In the old days (during the 70s and 80s), the retirement rule of thumb suggested that the portion of a portfolio be weighted toward bonds is equal to the investor’s age. This means that if you were 40, 40% would be in bonds and 60% in stocks. When you hit 70, bonds would make up 70% of your portfolio—stocks, just 30%. The older you get, the more you want to have in bonds, because bonds, as the story goes, provide dependable interest.

And back in the day, it made sense to do that. At the beginning of 1979, the U.S. 10-year bond rate stood at 9.1%; at the end of the year, it had risen to 10.4%. By 1981, the rate was an astounding 15.3%. Today, U.S. 10-year bonds pay about two percent. (Source: “Historical US Treasury Bond Rates,” ForecastChart.com, last accessed February 20, 2013.)

If you had a $500,000 portfolio in 1981, you could look forward to receiving $75,000. In 2012, that same portfolio would hand you just $10,000 a year. Toss in the $1,280 a month you receive from Social Security, and you’re looking at an annual retirement income of just $25,000 a year. That’s not much retirement income for anyone to live on.

According to the Federal Reserve, in 2007 (right before the Great Recession) a $100,000 short-term certificate … Read More


Five Inconvenient Truths About Retirement

By for Daily Gains Letter | Jan 29, 2013

DL_John_290113-150x88Even at the best of times, saving for retirement is not an easy task. Throw in economic uncertainty and low savings rates, and the idea of a well-fortified retirement plan can simmer away on the backburner, undisturbed for years. This may be a taste of things to come when you consider that Americans are retiring earlier, living longer, and saving less.

A recent report shows that the confidence of Americans in their ability to retire comfortable is at historic lows. Just 14% are “very confident” they will have enough money to live comfortably when they retire; on the other end of the scale, 23% say they are “not at all” confident. (Source: “The 2012 Retirement Confidence Survey; Job Insecurity, Debt Weight on Retirement Confidence, Savings,” Employee Benefit Research Institute web site, March 2012, last accessed January 29, 2013.)

And, approximately 60% of middle-class retirees will likely run out of money if they maintain their pre-retirement lifestyle and don’t cut spending by at least 24%.

Even though the majority of baby boomers view retirement as a crisis, few understand how much money they’ll actually need to retire. (Source: “Outliving Your Money Feared More Than Death: Allianz Life Study Reveals Boomers Guessing at Retirement Needs,” Allianz Life Insurance Company of North America web site, June 17, 2010, last accessed January 29, 2013.)

This disconnect is a recipe for disaster, and it makes investing for retirement more important than ever. The more people understand about how much they’ll need to retire in comfort, the more likely they are to act.

But first, there are five inconvenient retirement facts you should know if you … Read More