Today’s low yields (low interest rates) have changed the investing landscape. Especially for retirees. Historically, when planning for retirement income, investors could rely on a balanced portfolio with bonds, stocks and Cash. CD’s would lower the risk while adding some interest income.
Today this is just not possible. With the Federal Reserve Board keeping short-term interest rates at 0% for 8+ years (now at 0.50%), the entire yield curve has sunk to amazing lows (yield curve – yields from short term to long term plotted on a graph).
Low Yields – What Can You Do?
An interesting Wall Street Journal Article highlighted this issue also. What can you do?
As it states in the article, we can’t keep waiting for rates to go up so that we can save in CD’s and make 6-8% again. Who knows how long rates will be low. So we are “forced” to seek higher yields in something not so safe – the markets. I can’t tell you how to invest for income without talking to you one on one, but I can help you decide what approach works best for your personality type. Here are some questions to ask:
- Do you like a secure monthly payments – and if so, is it a necessity?
- Are you trying to maximize growth of your portfolio and not worried because you have pensions and social security coming in?
- Do you want to preserve a sizable chunk of your portfolio for the next generation or are you ok spending down principal if your quality of life depended on it?
Low Yields Solutions: Research and Action Steps
You must answer these and other questions like them before investment decisions are made. Take some time to discuss this with a qualified retirement advisor/analyst, and get your situation squared away sooner rather than later.
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