Friday, September 27, 2013

Inflation Insurance For Your Retirement

inflation insurance retirement portfolioInflation is as violent as a mugger, as frightening as an armed robber and as deadly as a hit man.” -Ronald Reagan
When approaching retirement the main question a retiree will try to answer is “How much money do I need to cover my annual expenses“.  While this is certainly a question that has to be answered, there is another one that must be considered as well – “What will my annual expenses be in 10, 20, or 30 years?
The term “fixed income” is used far too often when discussing retirement investing and planning. Fixed income suggests you should be able to decide today how much income you are going to need each year of retirement. But because of inflation we know that our expenses are not going to be fixed, so we should not plan for our income to be either. If you plan to withdraw the same amount from your retirement account annually then you will be losing purchasing power each year due to inflation. And many people underestimate the effect inflation has on their retirement plans. While we have seen wide swings of the inflation rate with highs above 10% in the late 70′s and early 80′s, the general rule of thumb is to plan for an annual rate of 3%. So how does that 3% affect your spending power over time?  READ MORE

Tuesday, September 17, 2013

Ka-Ching! Microsoft Just Gave Me a 22% Raise

Microsoft (MSFT) today announced a 22% increase of its quarterly dividend from $0.22 to $0.28 which now gives the stock a 3.4% dividend yield. They also announced a $40 billion stock buyback program that replaces a previous buyback program that was set to expire. Both of these actions demonstrate MSFT's determination to return value to shareholders through other means than price appreciation.

This increase more than doubles an investors Yield on Cost for those who were invested in 2010 when the company was paying a quarterly dividend of $0.13. That is an impressive feat in such small amount of time.

Tuesday, September 10, 2013

5 Safe Dividend Stocks When Using The 4% Rule

The 4% Rule

The 4% rule is a general rule of thumb used by financial experts to determine how much individuals should be withdrawing from their retirement account each year. This is considered a safe and sustainable rate for a retiree with a long life expectancy.

In a high interest rate environment, generating 4% of income from your retirement nest egg could be achieved. With today’s low bond, Treasury Bill, CD, and money market rates, retirees have been forced to use other alternatives. These alternatives typically require investors to reduce their retirement savings each year. Or they rely on mutual fund investments to attempt to increase their portfolio and provide income and yet, they are not aware of the fees being accrued no matter the rate of success or failure of the mutual fund. Although the 401(k) and mutual funds were created to benefit the investor, financial companies are the ones who have truly been rewarded.

In the past decade retired investors have had to weather two economic recessions, a mortgage crisis, and a highly volatile stock market. Those planning for an upcoming retirement have likely heard the horror stories of retirement accounts getting wiped out during this time causing many retirees to re-enter the workforce in order to get by.  This has created a great deal of timid investors wary of risking their life savings in the stock market, but still searching for a way to generate a safe and reliable income stream. READ MORE