| Bonds Online |
 |
|
| 5/10/2013Market Performance |
| Municipal Bonds |
|---|
|
S&P National Bond Index
|
3.00% |
|
|
S&P California Bond Index
|
2.96% |
|
|
S&P New York Bond Index
|
3.13% |
|
|
S&P National 0-5 Year Municipal Bond Index
|
0.70% |
|
|
| S&P/BGCantor US Treasury Bond |
400.09 |
|
| More |
|
| Income Equities: |
|---|
| Preferred Stocks |
|---|
|
S&P U.S. Preferred Stock Index
|
848.03 |
|
|
S&P U.S. Preferred Stock Index (CAD)
|
636.26 |
|
|
S&P U.S. Preferred Stock Index (TR)
|
1,701.05 |
|
|
S&P U.S. Preferred Stock Index (TR) (CAD)
|
1,276.26 |
|
|
| REITs |
|---|
|
S&P REIT Index
|
174.07 |
|
|
S&P REIT Index (TR)
|
425.30 |
|
|
| MLPs |
|---|
|
S&P MLP Index
|
2,469.58 |
|
|
S&P MLP Index (TR)
|
5,428.50 |
|
|
See Data
|
|
|
|
 |
|
|
|
|
|
|
Create a Paycheck in Retirement With a Total-Return Approach |
MORNINGSTAR - Dec. 8, 2010 - By Christine Benz
If you're looking to establish a sane, sustainable withdrawal plan, then follow these tips.
We've frequently debated income versus total-return approaches on Morningstar.com during the past few years, with partisans weighing in on both sides of the debate. I've made no secret of my own totalnik leanings, noting that investors who are fixated on generating current income from their portfolios are often taking on disproportionate risks.
But there's an area in which incomeniks have it all over the totalniks, and that's in ease of implementation in retirement. By using an income-oriented approach, you can create the equivalent of a steady paycheck in retirement (or attempt to, anyway). But tapping your principal periodically, as you're required to do with a total-return approach, isn't just psychologically difficult. It's also a logistical headache. You have to figure out which accounts to tap for cash, which in turn affects where you're holding liquid assets, and you also have to figure out how to tap your accounts in the most tax-efficient manner possible. Given that, it's no wonder that so many retirees are attracted to investments that kick off current income.
Of course, annuities have long held appeal to those seeking to generate a paycheck in retirement. But with interest rates as low as they are now, annuity payouts are also depressed. Financial-services firms have been busy cooking up new investment products to help retirees generate a paycheck in retirement; many of them combine investments with insurance features. It's early days for most of these vehicles, however, and at this point, it's tough to give a ringing endorsement to any one option within this relatively untested group. Moreover, many investors are satisfied with their current investment portfolios; they're just not sure where to turn for cash when they need it.
That's where the bucket approach to retirement planning can be so effective. Retirement theoreticians often consider bucket strategies as too simplistic, but the concept resonates with many real-life retirees and the financial advisors who work with them. The basic idea is that you create a dedicated pool of assets, composed of cash and other very liquid holdings, to meet your near-term income needs. Once you've done that, you can hold those assets that you don't need to fulfill near-term living expenses in progressively more aggressive investment vehicles.
Such a strategy helps ensure that you're taking money from your most stable pool of assets first, and therefore you won't have to withdraw from your higher-risk/higher-return accounts (for example, those that hold stocks or more-risky bonds) when your account is at a low ebb. That strategy also gives your stock assets, which have the potential for the highest long-term returns, more time to grow.
Here's how to use a total return "bucket" approach to meet your own in-retirement cash needs.
1. Determine the Paycheck You Need From Your Portfolio
If you're attempting to create the equivalent of a paycheck from your portfolio, the first step is to gauge your income needs during retirement, either on an annual or a monthly basis. Start by tallying your total expenditures, then subtract steady sources of income that you can rely on, including Social Security and pension income. What's left over is the amount that you'll need to extract from your portfolio each month or each year.
2. Make Sure Your Withdrawal Rate Is Sustainable
The next step is to evaluate whether your desired portfolio withdrawal amount is too large or just about right. Most financial planners consider a 4% annual withdrawal rate, combined with annual upward adjustments to accommodate inflation, a safe withdrawal amount. For another check, Morningstar's Asset Allocator tool can help you determine whether your current portfolio puts you on track to meet your retirement-income needs. (Just bear in mind that it's using fairly rosy return expectations for stocks.)
For the complete article.
|
|
|
|
|
|
| Partner Market Place |
|
|
|
| Stuff to look at |
Yield and Income Newsletter: A must have for income investors. subscribe NOW
S&P Commentary and Newsletters: S&P
|
|
| BondsOnline Advisor |
Income Security Recommendation January 2013 Issue.
Keep up with monthly, in-depth coverage of fixed income market strategies, commentary, and insights as seen by our sources. Sign up for the free BondsOnline Advisor now!
Unsubscribe here [+] |
|
|
|
|
