Connect with us

Business

Finance: Cashing in on retirement

Legacy Phuket Gazette

Published

 on 

PHUKET: Generating an income in retirement beyond any pension or government-sponsored retirement plan has become much harder in today’s low-interest-rate environment. The income from defined pensions and even retirement benefits from government-sponsored plans are no longer a sure thing.

However, there are strategies that help to maximize income during retirement:

Dividend-paying stocks or exchange-traded funds (ETFs)

Dividend paying stocks are the best way to generate income in retirement, but picking the right stocks can be tricky. It is ideal to avoid those with the highest yields or any stock with uncertain cash flows or profits. Instead, look for well-managed, profitable companies in stable industries that also have good balance sheets and are seeing at least modest or steady growth.

With that in mind, there should be no shortage of consumer stocks, utilities, real-estate investment trusts (REITs) and master limited partnerships – usually oil or gas pipelines – with reasonable yields from 2% to 5%, but be sure to check payout ratios, as anything over 100% is not going to be sustainable in the long term. If the risk associated with picking and owning individual stocks is a turnoff, then ETFs that invest in sectors where dividends tend to be high can be a good alternative.

Fixed-income investments

Individual bonds held to maturity are a good way to receive a guaranteed stream of income – unless the bond issuer goes bankrupt. For that reason, avoid so-called ‘junk bonds’ with high yields, and be careful about investing in individual municipal bonds as municipalities and cities can, and do go, bankrupt (think Detroit).

Just remember that when interest rates rise, bond values fall, but bond values rise when rates fall.
In addition, and when investing in individual bonds, be sure to ‘ladder’ the maturities: for example – six months, one year, two years, five years, 10 years and so on – so that everything does not come due at once when interest rates are super low, like right now. Also, investing in low-cost bond ETFs can limit the risks associated with owning individual bonds.

Cash in term deposits or money market accounts

Setting aside a couple years worth of cash in CDs or term deposits and money market accounts is always a good idea. While the funds themselves will not generate much interest right now, money can still be drawn to supplement income from other sources as needed, and can be used in case of an emergency or to invest when interest rates start rising again.

As with individual bonds, try to ladder the maturities of CDs/term deposits to avoid all deposits coming due at the same time.

Annuities

Generally, annuities are a bad idea for most investors and retirees because they often come with unnecessarily high annual expenses that reward Wall Street, and high commissions that reward the financial adviser who sells them to you.

That said, having an annuity generating some guaranteed income to cover fixed expenses during retirement could make sense in some situations – but be sure to read the fine print and fully understand what is being offered.

Limit-investment expenses

A good indirect way to earn additional income in retirement is to limit the investment fees paid in the form of high commissions or annual expenses on fund products by choosing individual stocks, individual bonds and/or ETFs with low expenses and commissions.

Cut back on expenses and debt

Another indirect way to boost retirement income is to simply spend less money during retirement. Also, it is prudent to pay off any debt before entering retirement and to not take on any new debt so that interest payments will not take a bite out of income or savings.

In other words, take a reality check about the life to be lived in retirement and decide what is essential and what is not affordable.

Don Freeman is president of Freeman Capital Management, a Registered Investment Advisor with the US Securities Exchange Commission (SEC), based in Phuket, Thailand. He has more than 15 years experience and provides personal financial planning and wealth management to expatriates. Specializing in UK and US pension transfers. Call 089-970-5795 or email: freemancapital@gmail.com

— Don Freeman

 

Get more from The Thaiger

📱 Download our app on Android or iOS
👋 Have your say on our Thailand forums
🔔 Subscribe to our daily email newsletter
📺 Subscribe / Join YouTube for daily shows
👍 Like/Follow us on Facebook
🐦 FOLLOW us on Twitter
📷 FOLLOW us on Instagram

image

Join the conversation and have your say on Thailand news published on The Thaiger.

Thaiger Talk is our new Thaiger Community where you can join the discussion on everything happening in Thailand right now.

Please note that articles are not posted to the forum instantly and can take up to 20 min before being visible. Click for more information and the Thaiger Talk Guidelines.

Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Archiving articles from the Phuket Gazette circa 1998 - 2017. View the Phuket Gazette online archive and Digital Gazette PDF Prints.

Follow Thaiger by email:

Insurgency3 hours ago

Suspected insurgent wanted for murder killed by forces in Pattani

Thailand5 hours ago

Phang Nga reopening and “Phuket Sandbox” island hop extensions postponed

Best of5 hours ago

Bangkok’s 5 best SHA Plus Certified hotels

Welcome back to Thailand!

Thaiger is getting behind local businesses for the restart of tourism in Thailand - up to 50% discounts across all advertising packages!

Best of6 hours ago

Top 5 steakhouses in Phuket

Thailand6 hours ago

Bangkok Train Market official says they will reopen

Thailand6 hours ago

August vaccination plan: 80% of Bangkok residents; open to general public, expats

image
Join the conversation on the Thaiger Talk forums today!
Thailand7 hours ago

300 beds added to Phuket’s second field hospital

Thailand7 hours ago

The Thaiger launches the ‘I Am Strong’ campaign

Indonesia7 hours ago

Earthquake hits Papua, Indonesia

Thailand7 hours ago

Thailand News Today | More Dark red zones, ‘coup rumour’ quashed | August 2

Thailand8 hours ago

Man arrested for allegedly robbing 7-Eleven stores in Bangkok to pay off gambling debt

Thailand8 hours ago

Protestors fill Bangkok streets to protest Prayut, many protest leaders present

Crime9 hours ago

Teenagers arrested for allegedly running underage prostitution racket

Thailand9 hours ago

PM’s daughters get letter asking them to tell their father to resign

Coronavirus (Covid-19)10 hours ago

Monday Covid Update: 17,970 new cases, provincial totals

Thailand5 months ago

Thailand News Today | Thai Airways in rehab, All go for Songkran | March 4

Tourism5 months ago

Phuket’s nightlife. Yes, bars and clubs are still open | VIDEO

Phuket5 months ago

Thailand News Today | Covid passport talks, Thai Airways heads to court | March 2

Tourism5 months ago

Phuket Thai food treats you need to try | VIDEO

Thailand5 months ago

Thailand News Today | Bars, pubs and restaurants ‘sort of’ back to normal | Feb 23

Tourism5 months ago

In search of Cat & Dog Cafés in Phuket Town | VIDEO

Thailand6 months ago

Thailand News Today | Gambling crackdown, Seafood market to reopen, Vlogger challenge | Jan 21

Thailand7 months ago

Thailand News Today | Covid testing for visas, Business impact, Vaccine approval | January 19

Thailand7 months ago

Thailand News Today | Weekend Bangkok bombs, Thailand fires, Covid update | January 18

Thailand7 months ago

Thailand News Today | Stray car on runway, Indonesian quake, 300 baht tourist fee | January 15

Thailand7 months ago

Thailand News Today | Governor off respirator, sex-trafficking arrest, condo prices falling | January 14

Thailand7 months ago

Thailand News Today | Chinese vaccine, Thailand ‘drug hub’, Covid update | January 13

Thailand7 months ago

Thailand News Today | Bangkok may ease restrictions, Phuket bar curfew, Vaccine roll out | January 12

Thailand7 months ago

Thailand News Today | Covid latest, Cockfights closed down, Bryde’s Whale beached | January 11

Thailand7 months ago

Thailand News Today | Southern floods, Face mask fines, Thai Air Asia woes | January 8

Trending