Income versus growth A new way to look at retirement UPDATE 6 10 2023

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With markets in continued disarray for well over a year now, investors may be looking at ways to solidify income instead of pursuing traditional growth strategies.

You really can’t blame them. The longer the market falls, the more discouraged an investor may become.

There are solutions to be able to abandon growth for long term income and looking in this direction can open up more possibilities than just buying a handful of stocks and sweating out market crashes.

Certificates of Deposits (CDs) are available both through your local bank or credit union and through most financial advisory firms. Right now, the return on CDS are healthier than they’ve been in decades due to the increase in interest rates by the Federal Reserve.

Time Frame Laddering CDs (my term here) is a sound strategy to both garner possibly higher returns along with a 100% government guarantee on principal. Laddering means buying different maturity dates which enables you to lock in returns for a longer period of time yet have some level of liquidity. For instance, buying a 6 month CD, a 1 year, 2 year and 5 year CD is an example of laddering. Although a 5 year CD would be essentially tied up for 5 years, the shorter duration CDs convert back to cash sooner according to each maturity date that you select. I wouldn’t recommend buying anything longer than 5 years out as there is too much that could happen to interest rates given the current crazy economic environment, but that’s just me.

One could certainly consider 10, 20 or even 30 year products be added to a ladder portfolio. Just make sure you understand the advantages and drawbacks of longer time commitments.

You could use the same strategy for Treasury Bills, notes or bonds. Seek out a financial professional or discuss with your local bank to understand the differences between CDs and Treasury products. These are also government guaranteed.

Buying a basket full of dividend stocks is another way to garner long term income. Dividends are sort of like thank you gifts from the publically traded companies that offer them.

Basically if you buy a share of a dividend paying company, they pay you a certain amount for every share you own every so often.

Some dividend paying companies have paid dividends for decades, and some have increased their payments every year for just as long. Be aware however that dividends can be reduced or even eliminated by the company at any time. As a general rule however, if a company have been paying dividends for years and/or has never cut them, there is a good chance they would want to preserve that track record. Another consideration of dividend paying stocks is the price of the stock could drop or go up. Going up would be nice of course but a drop in price could sting a bit. Price changes do not necessarily change your payment however but it could.

Buying bonds (debt from companies, municipalities or even states) are usually regarded as a bit more stable than stocks. They pay an interest rate and you can buy insured bonds if you’re worried about a default, and yes, defaults can happen.

Many conservative investors hold just a portfolio of bonds, having been taught by their grandfathers that bonds are a stalwart of a consistent investment strategy. Some argue however that this way of thinking is old fashion and indeed, the bond markets have been hammered like stocks on numerous occasions.

I would tend to agree that bonds, albeit, the RIGHT ONES, can be safer than holding some stocks, but in the last few decades, even bonds have, at times, been uncharacteristically volatile.

Like all investments, make sure you understand the ins and outs before venturing into the arena.

Income annuities are contracts from insurance companies that, in exchange for a payment(s) to them, they promise to pay you a certain amount for a certain period of time. Lifetime income is available and you can even select the percentage return you desire, locked in for life, if you meet certain conditions.

Not falling into the traditional discussion of what is called equities, you can always dip your toes into being a landlord and garner a property to rent out. Renting out a home, condo or mobile home, or taking advantage of the Airbnb phenomenon can supplement ones income. This route is a popular one should you be able to manage the work and investment required of such an endeavor.

Concluding, altering ones focus from capital appreciation (growth) to securing income can open up more avenues of consideration rather than just watching Wall Street all day.

“Watching the markets so you don’t have to”

This article expresses the opinion of Marc Cuniberti and is not meant as investment advice, or a recommendation to buy or sell any securities, nor represents the opinion of any bank, investment firm or RIA, nor this media outlet, its staff, members or underwriters. Mr. Cuniberti holds a B.A. in Economics with honors, 1979, and California Insurance License #0L34249. (530)559-1214.