Tag Archives: retirement investing

Three Things To Do Today To Improve Your Retirement Planning

Guest Article By Morris Raymond

There are a number of things that make a person break into a cold sweat, but perhaps one of the more underrated ways to cause stress is thinking about planning for the future with an emphasis on retirement planning. It seems odd that planning for the amount of money you have for future use would cause so much havoc simply because we tend to be big fans of money. Still, there seems to be a negative cloud that surrounds all that is planning for retirement.

Perhaps it’s because it reminds us of an end to things as we know them. Sure, it’s only the end of our working life, but many of us identify ourselves by the careers we establish. When you’re no longer working, how does that ultimately affect the way you identify yourself? Big questions to be sure, but it also reminds us that we’re getting older & looking at our mortality head-on.

Regardless of the reasons why we put off planning for retirement, it’s important to make a plan early. While it may seem as though there is a big process involved, it’s as simple as choosing to start planning. After this step, here are three more simple ways to get the retirement planning process moving forward:

1. Set Goals – When it comes to retirement, we always hope to relax and have a nice time doing nothing. Even with nothing pressing, though, we want to do something cool like travel or dive into a hobby. One easy way to start a retirement plan is to lay out the type of goals you’d like to accomplish. Whether they seem a little extravagant or not isn’t an issue. A goal is a goal, and so long as it’s important to you & your family, list it.

2. Create A Working Budget – Though this seems to be a step most people in debt take, it is a step that even a careful retirement planner should take to help get their finances in better order. Sit down & establish your monthly expenses. Establish what your take-home pay is per month and see where the numbers fall. If you’re spending more than you’re making, you need to figure out the best way to shed unnecessary spending. If you’re “in the black”, the extra money should be used to begin establishing your retirement account.

3. Be Mindful of Extra Money – If you have money that comes to you in the way of a work bonus or raise, just don’t spend it. Literally, put that extra money into a retirement fund. You were operating before on the money being brought into your home, so it means you can still operate the same way. Any extra money should be seen as money that’s just out of your reach & untouchable.

Obviously, retirement planning is more complicated than what’s outlined here. Still, these are three very simple steps to start the process, and simply starting to plan for retirement is a step in the right direction.

Need help with retirement planning? Contact Sproles Woodard for more information on other steps you can take to get the retirement ball rolling, and take advantage of the numerous financial planning services they have to offer.

Article Source: https://EzineArticles.com/expert/Morris_Raymond/2323165

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Being Financially Stable

Guest Article By Rosemarie Sumalinog Gonzales 

If saving for retirement is a struggle, imagine yourself if you lost a job. More and more people really take care of their own retirement security. To avoid unnecessary financial constraints, create a plan to reduce debt as you approach retirement. Design your savings and spending plans.

Retirement planning is definitely difficult, especially if the implications of your choices tend to get magnified. You’ll need to determine the amount of savings needed for your desired lifestyle. A spending strategy is equally important. However, rather than following a budget, many people spend more than what comes in.

Determine your annual base or mandatory expenses on food, clothing, shelter, utilities, medical, and transportation expenses. Also consider investing in long-term health care insurance which can typically cover the cost of home care, nursing-home care, and assisted living which is not usually covered by traditional health insurance.

Safeguarding your finances while you are still employed will help you become financially stable even after retirement. Many people are anxious when their retirement years are fast approaching. Imagine being at that point in your life and feeling you haven’t achieved your goals yet. It could get especially worrisome if you don’t have enough savings to be able to sustain your lifestyle after you retire. So, you need to enjoy spending within your means.

Securing a retirement fund is definitely needed if you want to live comfortably. The best time to start saving for your future is now. Not next year, not next week, not tomorrow, and not even later. Start planning for retirement at this very moment. It’s better to start sooner than later. The earlier you plan, the more time you have to save money, pay off debt, and invest in the future. You also give yourself some leg room in case you make a bad decision and need to recover from a mistake. If you start investing late, then you lower the possibility of accomplishing your retirement plans.

Consistency is essential in saving money for your retirement. At first, it may be difficult, but you’ll find it easier to save as you get along. One of the solutions for this is to set aside savings every month, even just a small amount. Save more as you go along-but never, never go below the initial savings amount.

Planning may be easy, but it’s the willingness and determination to stick to your plans that could bend at times. It’s important to have a clear vision ahead. No matter how far away your retirement years may seem, it is always a good idea to learn how to manage your personal finances. Those people who know how to manage their money succeed in allotting enough money not just for their savings but also for other financial matters.

It’s important to create a budget. Separate your needs from your wants and try to track your spending on a monthly basis by listing down all your expenses. Seeing where you spend your money can help you sort out your priorities and plan how you can save more from your income and spend less on non-important expenses.

Retiring from work is a major leap in one’s life. Prepare for the inevitable as early as now and assure a financially stable future for yourself and your family.

Article Source: https://EzineArticles.com/expert/Rosemarie_Sumalinog_Gonzales/1972656

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Managing The Retirement Income Portfolio: The Plan

Guest Article By Steve Selengut 

The reason people assume the risks of investing in the first place is the prospect of achieving a higher “realized” rate of return than is attainable in a risk free environment… i.e., an FDIC insured bank account featuring compound interest.

Risk comes in various forms, but the average income investor’s primary concerns are “financial” and, when investing for income without the proper mindset, “market” risk.

  • Financial risk involves the ability of corporations, government entities, and even individuals, to honor their financial commitments.
  • Market risk refers to the absolute certainty that all marketable securities will experience fluctuation in market value… sometimes more so than others, but this “reality” needs to be planned for and dealt with, never feared.
  • Question: Is it the demand for individual stocks that push up funds and ETF prices, or vice versa?

We can minimize financial risk by selecting only high quality (investment grade) securities, by diversifying properly, and by understanding that market value change is actually “income harmless”. By having a plan of action for dealing with “market risk”, we can actually turn it into investment opportunity.

  • What do banks do to get the amount of interest they guarantee to depositors? They invest in securities that pay a fixed rate of income regardless of changes in market value.

You don’t have to be a professional investment manager to manage your investment portfolio professionally. But, you do need to have a long term plan and know something about asset allocation… an often misused and misunderstood portfolio planning/organization tool.

  • For example, annual portfolio “rebalancing” is a symptom of dysfunctional asset allocation. Asset allocation needs to control every investment decision throughout the year, every year, regardless of changes in market value.

It is important to recognize, as well, that you do not need hi tech computer programs, economic scenario simulators, inflation estimators, or stock market projections to get yourself lined up properly with your retirement income target.

What you do need is common sense, reasonable expectations, patience, discipline, soft hands, and an oversized driver. The “KISS principle” should be the foundation of your investment plan; compound earnings the epoxy that keeps the structure safe and secure over the developmental period.

  • Over the past ten years, such risk free saving has been unable to compete with riskier mediums because of artificially low interest rates, forcing traditional “savers” into the mutual fund and ETF market place.
  • (Funds and ETFs have become the “new” stock market, a place where individual equity prices have become invisible, questions about company fundamentals meet with blank stares, and media talking heads tell us that individuals are no longer in the stock market).

Additionally, an emphasis on “working capital” (as opposed to market value) will help you through all four basic portfolio management processes. (Business majors, remember PLOC?) Finally, a chance to use something you learned in college!

Planning for Retirement

The retirement income portfolio (nearly all investment portfolios become retirement portfolios eventually) is the financial hero that appears on the scene just in time to fill the income gap between what you need for retirement and the guaranteed payments you will receive from Uncle and/or past employers.

How potent the force of the super hero, however, does not depend on the size of the market value number; from a retirement perspective, it’s the income produced inside the costume that shields us from financial villains. Which of these heroes do you want fueling your wallet?

  • A million dollar VTINX portfolio that produces about $19,200 in annual spending money.
  • A million dollar, well diversified, income CEF portfolio that generates more than $70,000 annually… even with the same equity allocation as the Vanguard fund (just under 30%).
  • A million dollar portfolio of GOOG, NFLX, and FB that produces no spending money at all.

I’ve heard said that a 4% draw from a retirement income portfolio is about normal, but what if that’s not enough to fill your “income gap” and/or more than the amount produced by the portfolio. If both of these “what ifs” prove true… well, it’s not a pretty picture.

And it becomes uglier rather quickly when you look inside your actual 401k, IRA, TIAA CREF, ROTH, etc. portfolio and realize that it is not producing even close to 4% in actual spendable income. Total return, yes. Realized spendable income, ‘fraid not.

  • Sure your portfolio has been “growing” in market value over the past ten years, but it is likely that no effort has been made to increase the annual income it produces. The financial markets live on market value analytics, and so long as the market goes up every year, we’re told that everything is fine.
  • So what if your “income gap” is more than 4% of your portfolio; what if your portfolio is producing less than 2% like the Vanguard Retirement Income Fund; or what if the market stops growing by more than 4% per year… while you are still depleting capital at a 5%, 6% or even a 7% clip???

The less popular (available only in individual portfolios) Closed End Income Fund approach has been around for decades, and has all of the “what ifs” covered. They, in combination with Investment Grade Value Stocks (IGVS), have the unique ability to take advantage of market value fluctuations in either direction, increasing portfolio income production with every monthly reinvestment procedure.

  • Monthly reinvestment must never become a DRIP (dividend reinvestment plan) approach, please. Monthly income must be pooled for selective reinvestment where the most “bang for the buck” can be achieved. The objective is to reduce cost basis per share and increase position yield… with one click of the mouse.

A retirement income program that is focused only on market value growth is doomed from the getgo, even in IGVS. All portfolio plans need an income focused asset allocation of at least 30%, oftentimes more, but never less. All individual security purchase decision-making needs to support the operative “growth purpose vs. income purpose” asset allocation plan.

  • The “Working Capital Model” is a 40+ years tested auto pilot asset allocation system that pretty much guarantees annual income growth when used properly with a minimum 40% income purpose allocation.

The following bullet points apply to the asset allocation plan running individual taxable and tax deferred portfolios… not 401k plans because they typically can’t produce adequate income. Such plans should be allocated to maximum possible safety within six years of retirement, and rolled over to a personally directed IRA as soon as physically possible.

  • The “income purpose” asset allocation begins at 30% of working capital, regardless of portfolio size, investor age, or amount of liquid assets available for investment.
  • Start up portfolios (under $30,000) should have no equity component, and no more than 50% until six figures are reached. From $100k (until age 45), as little as 30% to income is acceptable, but not particularly income productive.
  • At age 45, or $250k, move to 40% income purpose; 50% at age 50; 60% at age 55, and 70% income purpose securities from age 65 or retirement, whichever comes first.
  • The income purpose side of the portfolio should be kept as fully invested as possible, and all asset allocation determinations must be based on working capital (i.e., portfolio cost basis); cash is considered part of the equity, or “growth purpose” allocation
  • Equity investments are limited to seven year experienced equity CEFs and/or “investment grade value stocks” (as defined in the “Brainwashing” book ).

Even if you are young, you need to stop smoking heavily and to develop a growing stream of income. If you keep the income growing, the market value growth (that you are expected to worship) will take care of itself. Remember, higher market value may increase hat size, but it doesn’t pay the bills.

So this is the plan. Determine your retirement income needs; start your investment program with an income focus; add equities as you age and your portfolio becomes more significant; when retirement looms, or portfolio size becomes serious, make your income purpose allocation serious as well.

Don’t worry about inflation, the markets, or the economy… your asset allocation will keep you moving in the right direction while it focuses on growing your income every year.

  • This is the key point of the whole “retirement income readiness” scenario. Every dollar added to the portfolio (or earned by the portfolio) is reallocated according to “working capital” asset allocation. When the income allocation is above 40%, you will see the income rising magically every quarter… regardless of what’s going on in the financial markets.
  • Note that all IGVS pay dividends that are also divvied up according to the asset allocation.

If you are within ten years of retirement age, a growing income stream is precisely what you want to see. Applying the same approach to your IRAs (including the 401k rollover), will produce enough income to pay the RMD (required mandatory distribution) and put you in a position to say, without reservation:

Neither a stock market correction nor rising interest rates will have a negative impact on my retirement income; in fact, I’ll be able to grow my income even better in either environment.

My articles always describe aspects of an investment process I have been using since the 1970’s, as described in my book, The Brainwashing of the American Investor. All the disciplines, concepts, and processes described therein work together to produce (in my experience) a safer, more income productive, investment experience. No implementation should be undertaken without a complete understanding of all aspects of the program.

Article Source: https://EzineArticles.com/expert/Steve_Selengut/12786

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VDE vs. QYLD

I’m always on the lookout for ETFs to add to my investment portfolio. I came across 2 that I thought were possible candidates. Because I have a limited amount of money to invest, I tend to limit myself to 1 stock investment during my investment period. Currently, my eye is on these 2. Both are consistent performers in term of dividends.

  1. VDE (Vanguard Energy ETF) – VDE tracks a market-cap-weighted index of US energy companies. The index includes those companies deemed investable by MSCI and covers 98% of the market. The fund invests in stocks of companies operating across energy sectors. It invests in growth and value stocks of companies across diversified market capitalization. This fund will allow me to diversify my portfolio to include energy stocks. As the name implied, this fund was created and managed by Vanguard (which I tend to prefer) back in 2004. Cost ratio is around .10%, which is a bit higher than I prefer. The fund is designated as an average risk (all investment entail a certain amount of risk, nothing is a sure thing). And lastly, the key factor to me is the dividend yield and dividend payout which is 5.69% and $2.74, respectively. The 5 year growth rate is a modest 4.73%. The current share price is $48.46. Which would not allow me to maximize my share ownership with my limited funds. $100 investment would only get me 2.06 shares. At the current dividend payout amount this would give me $5.65 in dividends.
  2. QYLD (Global X NASDAQ 100 Covered Call ETF) – The investment seeks to provide investment results that closely correspond, before fees and expenses, generally to the price and yield performance of the CBOE NASDAQ-100® BuyWrite V2 Index (the “underlying index”).The fund will invest at least 80% of its total assets in the securities of the underlying index. The CBOE NASDAQ-100® BuyWrite Index is a benchmark index that measures the performance of a theoretical portfolio that holds a portfolio of the stocks included in the NASDAQ-100® Index, and “writes” (or sells) a succession of one-month at-the-money NASDAQ-100® Index covered call options. It is non-diversified. The cost ratio is around 0.60% (a bit high for me) but the dividend yield and payout are 11.78% and $2.55, respectively, which is better than most % yields. There is no data for the 5 year growth rate. The investment risk is above average but the return is considered high. This fund was started in 2013. Lastly, the current share price is $21.69. This is a better price in terms of maximizing share ownership. $100 investment will get you 4.61 shares. At the current dividend payout amount this would give me $10.97 in dividends.

From the start I’m going to tell you that I like Vanguard funds and tend to gravitate toward them. I’m not saying that Vanguard funds are better than Fidelity or others, just that I like them better than the others. Another factor that goes into my decisions is that I try to avoid risks in my investments. All investments have a certain level of risk associated with them and I try to minimize those whenever I can. I tend to stay away from high risk investments and investment activities (i.e. day trading, value investing, etc.) for no other reason that I’m at an age where I may not have the luxury of recouping any losses that I incur. Again, with all investments there is always a possibility of incurring losses but those, again, I try to minimize/avoid. I don’t gamble. I live in an area where I am no more than an hour away from a casino, yet I can’t remember that last time I was in one.

Another factor that affects my decisions is that I love dividends, consistent dividends. If one of my funds cuts their dividend payout two time within the same period, they become a prime candidate for me to sell. I’m in it for the income. My goal is to replace my current wages with income from my investments so that I can stop having to get up and go to work. Additionally, if I should die the income from the investments, if left alone, would be enough to sustain my wife. So I like dividend investments with dividend that pay consistently and grow.

So, based on many factors and data, including my investment goals and preferences, I’ll probably go with VDE.

This is NOT a recommendation to buy or not buy a certain ETF stock. This post is just a collections of information and thoughts that I had when I was going through to determine which ETF stock to invest in. This post is not intended to be any kind of financial analysis for evaluating specific ETF stocks, other than for myself and to show others what kind of evaluation I go through.

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