{"id":7466,"date":"2014-03-03T11:23:07","date_gmt":"2014-03-03T19:23:07","guid":{"rendered":"http:\/\/www.marketriders.com\/investing\/?p=7466"},"modified":"2016-12-21T07:28:09","modified_gmt":"2016-12-21T15:28:09","slug":"maximizing-retirement-income","status":"publish","type":"post","link":"https:\/\/www.marketriders.com\/investing\/maximizing-retirement-income\/","title":{"rendered":"Maximizing Retirement Income"},"content":{"rendered":"

One of the fundamental challenges of\u00a0retirement\u00a0is making the switch from\u00a0retirement\u00a0investor to retiree. That means shifting from stocks to\u00a0income investments<\/a>\u00a0in timely and secure fashion.<\/p>\n

Easier said than done these days. The usual route,\u00a0owning U.S. bonds<\/a>, is fraught with unusual new dangers. Yields are low and bond prices are high, a reversal of a three-decade trend.<\/p>\n

Bond prices might go a bit higher, but there’s increasingly less room for that. Once interest rates begin to rise, those holding long bonds could find themselves on the wrong side of a very long unwinding.<\/p>\n

\"retirement<\/a><\/p>\n

How can you maximize\u00a0retirement\u00a0income without taking on unnecessary risk? Talk with your financial advisor about what makes the most sense for your situation:<\/p>\n

Bond ladders<\/strong><\/p>\n

In a bond ladder (or CD ladder), you own a series of individual bonds bought at different times. As they mature, you reinvest the gains back into new bonds.<\/p>\n

Pro:<\/strong>\u00a0Since a bond is always maturing, you can easily shorten or lengthen maturities to match the risk that interest rates might rise.<\/p>\n

Con:<\/strong>\u00a0In the current environment only short-term maturities are low risk, yet\u00a0they pay very little income<\/a>.<\/p>\n

Bond funds<\/strong><\/p>\n

A bond manager does the work for you, selling off bonds and repurchasing new ones to stay on track.<\/p>\n

Pro:<\/strong>\u00a0Less trouble than building your own bond ladder.<\/p>\n

Con:<\/strong>\u00a0High fees<\/a>.<\/p>\n

Dividend stocks<\/strong><\/p>\n

Blue-chip stocks can offer a\u00a0dividend yield in excess of inflation<\/a>\u00a0and many beat long government bonds these days.<\/p>\n

Pro:<\/strong>\u00a0Easy to buy, cheap to own and you might also realize price appreciation.<\/p>\n

<\/div>\n

Con:<\/strong>\u00a0Dividends can be cut and stocks can fall in value.<\/p>\n

High-yield bonds<\/strong><\/p>\n

Once commonly called “junk” bonds, high-yield bonds are issued by corporations. Another variety of high yield comes from foreign government bonds.<\/p>\n

Pro:<\/strong>\u00a0Better yields across the board and still a bond, rather than a stock.<\/p>\n

Con:<\/strong>\u00a0They were called “junk” for a reason. The higher the yield, the more you have to consider repayment risk, i.e., not getting your money back.<\/p>\n

High-yield stocks<\/strong><\/p>\n

It’s not just blue chips. Some lesser-known companies in fields such as shipping, energy and private equity pay very high dividends.<\/p>\n

Pro:<\/strong>\u00a0Double-digit yields can be attractive in a period when the broad stock market dividend yield is less than 1.9%.<\/p>\n

Con:<\/strong>\u00a0High volatility, high risk of a dividend cut, sleepless nights if you invest in a concentrated way in these stocks.<\/p>\n

Real estate and partnerships<\/strong><\/p>\n

Known as real estate investment trusts (REITs) and master limited partnerships (MLPs), these securities deliver income by design.<\/p>\n

Pro:<\/strong>\u00a0Less likely to be cut, since their legal structure requires distribution of income.<\/p>\n

Con:<\/strong>\u00a0They’ve been popular for several years running, so some may be overpriced now.<\/p>\n

The better strategy going forward for those seeking\u00a0retirement\u00a0income is to use a collection of investments that maximize the advantages while\u00a0minimizing the taxes, paperwork and risk<\/a>.<\/p>\n

The answer is to own a slice of each through exchange-traded funds that diversify at the lowest cost, all the while balancing the returns from the income portion against\u00a0stocks elsewhere in the portfolio<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"

One of the fundamental challenges of\u00a0retirement\u00a0is making the switch from\u00a0retirement\u00a0investor to retiree. That means shifting from stocks to\u00a0income investments\u00a0in timely and secure fashion. Easier said than done these days. The … Read more →<\/span><\/a><\/p>\n","protected":false},"author":8,"featured_media":7467,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_wp_rev_ctl_limit":""},"categories":[8],"tags":[],"yoast_head":"\nMaximizing Retirement Income | MarketRiders<\/title>\n<meta name=\"description\" content=\"One of the fundamental challenges of retirement is making the switch from retirement investor to retiree. 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