Retirement Survival – Trying to Hit a Moving Target

Moving Target Changing Plan Strategy Find Elusive Location - Retirement Survival – Trying to Hit a Moving TargetWhen it comes to retirement planning, Baby Boomers had the rug pulled out from under them by the government and Federal Reserve.

For decades, Boomers worked with their financial planners, saving, investing, and strategizing – targeting their “magic number.” How much money did they need to have on their retirement day to live comfortably and enjoy their golden years?

Bank bailouts, historic low interest rates and double-digit inflation have destroyed their plans, the target keeps moving. Retirement planning is a continuous battle to be sure you don’t outlive your money.

What is safe?

A major premise was you could always depend on 6% safe CDs or government bonds.

Safe meant you would not lose your money; you collected your interest payment on schedule and were assured you would get your money back at maturity. You wouldn’t lose a dime!

Today, “safe from default” is only part of the challenge.

My broker supplies a chart with CD and bond interest rates.

Fixed Income OfferingsDespite rising interest rates, we are still facing double-digit inflation. Unless the Fed is willing to raise rates higher than current inflation, don’t expect real inflation to come down anytime soon.

If you buy a 5-year CD @ 3.75%, you will get your money back in five years. You are guaranteed to lose a lot of buying power; bad for retirees….

Investors must focus on two safety issues: default and inflation.

Today, retirement planning is like standing on top of a huge rubber ball, trying to throw a dart, and hit a moving target. Don’t buy outrageous claims by financial planners, they are investing in the same market.

Should the Fed stay on course; expect the recession to continue. That affects jobs, retirement, and the stock market. If they don’t, high inflation will cause the same result and could be catastrophic. Fasten your seat belts!

What about dividend stocks?

Dividend stocks are important – but present many challenges.

I contacted our dividend expert, Tim Plaehn, editor of The Dividend Hunter. Tim’s publication focuses on safe dividend income, and he is dealing with these issues every day.

DENNIS: Tim once again, thank you for your time. The stock and bond markets are starting to see the effects of the Fed’s tightening. Asset prices are dropping, and retirees need even more income to pay the bills.

What is happening to stock prices of dividend payers? Have you seen any dividend cuts?

Magic hat and money bag - The Great Deception - Miller on the MoneyTIM: Hi Dennis. I enjoyed your comments about the “magic number”. When I was a financial planner, using computer programs to help calculate that number was considered the holy grail. Unfortunately, things have changed a lot since then.

Share prices in the higher yield sectors have performed better than the broad market indexes. It’s important to keep in mind that a focus on the dividend income we collect makes share prices less of a factor, except it’s always nice to boost your income by picking up more shares “on sale” during a market downturn.

There have been no dividend cuts in my Dividend Hunter recommendations.

DENNIS: When we had the market correction in 2020, we saw a lot of corporations cut their dividends. It was fashionable and they went along with the crowd. You published a special report on Preferred Stock dividends. Many of their stock prices were below par value and have done very well.

Is today’s market like what we saw then?

TIM: This is a much better market for income investing. 2020 was driven by fears of something completely different. This year’s bear market is more of the traditional market downturn.

Preferred shares act more like bonds. Preferred shares pay fixed, stable dividends, the prices move inversely to interest rates. Higher interest rates this year have pushed down preferred stock prices.

The result is current very attractive yields from preferred stocks, many are now selling below par value and the potential for capital gains if the shares get called in will add to your return. Meanwhile you’re collecting a nice dividend on a regular basis.

DENNIS: I know you are still focusing on both Common and Preferred Stock dividends. While companies can cut their common stock dividends, that doesn’t mean they have to.

It looks to me like it takes a lot of research and analysis to find those which you would consider “safe enough” to recommend to your readers and invest in yourself.

What are the “difference makers” that make companies stand out for you?

TIM: Your moving target analogy is a good one. Preferred analysis is a little easier. If a company pays common stock dividends, they must pay preferred stock dividends first, it is not optional. It doesn’t matter if the common dividend gets reduced. The preferred dividends are safe.

Analysis of dividend-paying common shares requires me to work towards a deep understanding of a company’s business and what factors would affect the ability to generate enough cash flow to support current and growing dividends. It’s a blend of following them closely, communicating with them regularly, staying on top of all the news, participating in their earnings calls…and factoring in my experience to make a judgment.

Dennis, I feel it is important that readers understand the differences between common and preferred stock dividends.

Preferred stock dividends are fixed and must be paid ahead of common shares. Like bonds, the dividends are a fixed amount and will not be raised. Share prices may vary, but they seldom go very far above par value. If they are called in, it will be at par and investors who bought above par will lose the difference. As I mentioned, there is a great opportunity for stock appreciation if you buy preferred shares below par value…as many of them are today.

Common stock dividends are corporations sharing profits with their owners – the shareholders. While management is motivated to keep shareholders happy, these dividends are not guaranteed. Dividends can be reduced or even suspended; but they can also be raised. I spend a lot of time researching companies that raise their dividends.

Shares of common stock can help with inflation because stock prices can go up, they can increase dividends, and pay special dividends. Dividend increases generally lead to share price increases. Many companies pride themselves on paying continuous dividends for decades and never cutting them.

I’ve seen several cases where investors held their common stocks for years and dividends have increased to the point where they are now earning great, double-digit returns on their original investment. The long-term potential for growth exists – with the right stocks.

As I mentioned earlier, our stock recommendations have not had any dividend cuts, and many have had dividend increases.

DENNIS: I’m reading a lot about “Bear Market Rallies”; meaning the market drops, then starts back up creating the illusion that all is well, then dropping sharply once again. During the great depression it took decades for the market to return to the previous high.

I get asked a lot about when to start buying back in. Cash is losing value big time, but if we are in a bear market rally, better buying opportunities will eventually arise.

What are you telling your readers?

TIM: I follow enough business news to understand that no one really knows where stock prices will go, especially in the shorter term. You can always find “experts” on both sides of any discussion about stock prices.

I tell subscribers to focus on building their income stream. If you buy one share of a dividend-paying stock, your income goes up.

If investors opt for automatic dividend investment, with each dividend they get more shares at the current price. That helps to average out your cost and your income goes up some more.

With a well-managed income-focused portfolio, your income will grow every quarter, no matter what happens in the stock market.

DENNIS: One final question. I’m getting leery of any bond or stock funds for a different reason. I’m at the point where I am willing to hold on and receive dependable income, as you suggest. I feel that in a fund, you have thousands of business partners. If they panic and sell, it forces the fund manager to sell good assets to make redemptions.

Are you shying away from funds these days?

TIM: Thanks again for the chance to address your readers.

Bond funds especially are good ways to lose your wealth. There are a lot of negatives to how bond funds operate.

Most of the stock funds I recommend I know the fund managers and intimately understand their investment strategies. There are a couple of specialty funds, such as covered call funds, where I want my subscribers to have exposure to a specific strategy.

However, the majority of my Dividend Hunter recommendations are common or preferred shares of individual companies.

Dennis here. I really appreciate Tim taking his time for our benefit.

Trying to maintain balance and hit a moving target is quite a challenge – and you need all the help you can get. Investors need to find trusted sources with good track records.

I look forward to Tim’s newsletter each month; it helps me stay on top of things, and many time I immediately act on his recommendations.

There is no, “set it and forget it” retirement plan anymore. Our new job is money manager for our life savings. Embrace the job, stay educated and you have a much better chance of making your money last for the duration.

Miller on the Money Free Retirement Planning Report For more information, check out my website or follow me on FaceBook.

Until next time…

Dennis

www.MillerOnTheMoney.com

“Economic independence is the foundation of the only sort of freedom worth a damn.” – H. L. Mencken

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ursel doran
ursel doran

GREAT review of the Fourth Turning!
” Tightly bound systems of interconnected dependency chains have been optimized to work perfectly in an era of expansion. They’re not optimized to gradually adjust to contraction; they’re optimized to break and trigger domino-like breakdowns in interconnected chains.
We don’t control these macro-trends, we only control our response.”
https://www.oftwominds.com/blogsept22/fourth-turn9-22.html

bucknp
bucknp

Wonder if there is a “future” panning gold?

BL
BL

Buck- Look for the black sand . I plan to spend some time panning after TSHTF.

bucknp
bucknp

It’s “media”, I use to watch the gold exploration shows. Some were in northern California. Who cares if you can “discover” gold.

Gold hunting in Texas , don’t know anyone that does it other than metal detectors for lost gold rings and jewelry which may come as a surprise…90% silver coin around old movie theaters and places peeps of the 50’s and 60’s congregated. Just make sure one is not trespassing. Treasure hunting was a fantasy of mine as a kid. Now I have the time to look around. Few people know or think about this stuff.

bucknp
bucknp

BL, I thought about you when uninformed me realized recently delta 8 is totally legal in Texas. Where have I been? Locked in man’s laws. I’m mostly not a “law” breaker’ (grin)

Anonymous
Anonymous

boomers will be the only ones who get what most people consider ‘retirement.’

bucknp
bucknp

…maybe, if they did not get their asses blown off in government orchestrated wars for profit schemes.

Anonymous
Anonymous

I know a lot of boomers around here that aren’t.

Iska Waran
Iska Waran

Boomers born in 1946 are different than those born in 1964. Today’s 58 year old is going to see the Social Security age pushed back and the benefits reduced – whether by inflation or Act of Congress or both.

bucknp
bucknp

Sorry, I was born in ’53, oops. I love the US but not like some kind of idol. “We” are supposed to get about 9.5% “raise” in 2023. I don’t “feel bad” at all seeing as how snowflake union railroad workers are getting 14% immediately.

But it’s not about them, it’s not about me. God has always provided despite the wretch I am.

Ghost
Ghost

Amen, buck.

Amazing Grace that saved us wretches in spite of ourselves.

Ken31
Ken31

That’s a good point.

bucknp
bucknp

Hum, were they not in the “system”?

Crawfisher
Crawfisher

I’m a Boomer, got less then two years to work. I now live in a rural area (older population demo), many are working in to their 70’s either they have to or are bored; some are single, some live in a RV trailer on a patch of land (not a $500k motorhome), some are very wealthy, especially those with two homes (primary in FL). What I notice is the vast majority of 65 + yo’s are happy. Almost to a person they are so glad to be out of the rat race.

Other than a few of recent retirees from some ‘big’ job, no one cares what you did for a living. I met one couple from FL, they had to get away from the bullsh!t country club types where everyone tries to out do their neighbor. They were so glad to get to away, wished they done it sooner.

ASIG
ASIG

Forget “The Magic Number” , it’s a lot simpler than that – More is Better.

Random63
Random63

Seriously? Stocks and the dollar? You are pushing that failed venture? I would rather invest in gold and oil backed rubles if I could. Meanwhile, retirement is in bullion, land, and other tangible commodities I physically hold and own.

Got out of the market in 2008 before the crash. Never went back. I don’t play rigged markets or fiat currencies.

Abigail Adams
Abigail Adams

RANDO! I haven’t seen you in a long time!

BL
BL

I don’t know RANDO but I like the way he thinks. Can’t argue with anything he said as I share his methods.

Random63
Random63

Been away getting a little quadruple bypass. I’m finally back and glad to see you all.

Abigail Adams
Abigail Adams

Nothing “little” about a quadruple bypass. Glad you’re well & back.

bucknp
bucknp

Surgeries now days docs get one up quick. I worked with a man 74 several years ago that had the same. He was back to work in a couple weeks.

Zoomer
Zoomer

Boomers had more opportunity and more income than any other generation yet they saved less.

bucknp
bucknp

LMAO, I was “making” 20K per year in ’81 when my son was born. I guess there were opportunities for jobs that paid a “living” and that was about it. I can remember going to a dentist and having a tooth extraction for $17. Damn, what is it now, $350? The dentists were making more than I obviously but I was right in line with common Joe as far as working for someone.

Anonymous
Anonymous

Move to a vacation area. Buy a small place although expensive. Buy a van and rent weekly. Camp in the van.

Iska Waran
Iska Waran

Two-ply toilet paper can be carefully separated into one-ply, doubling the area available for use. Nobody needs two ply toilet paper. Who wipes their ass with a quilt? What are you – Queen Charles?

falconflight
falconflight

You’ll be going back to the roll twice a much. You’re kidding right?

bucknp
bucknp

The “Art of the Deal”. Got to know how.

Which reminds me, sorry, in high school the dean of men met with us young men as he did once a week. “Boys, we’re using way too much toilet paper. Now, I know it takes a bale of hay to wipe my ass…” This is in Texas, 1969.

bucknp
bucknp

One-ply for septic systems. It never seems to be a problem and I buy wally world’s “Great Value” which I have determined is the same as Scott’s brand and believe it is Scotts for Wally. I can “feel” it. Ha. ha

Ken31
Ken31

Unacceptable.

bucknp
bucknp

I think Queen Charles uses Charmin. It’s a personal subject. I tried Charmin and it did not seem to have the same “feel” getting the job done. Plus I’m too use to rough and rugged life on the prairie in Texas, prickly pear cactus and and all that. No, don’t try prickly pear cactus, did not intend to suggest such.

tsquared
tsquared

I am a Late Bloomer as I turned 60 last year. I was also late starting a 401K retirement account when I was 32. In my early 40’s I had one financial advisor tell me I needed a million dollars in my 401k to retire in the same lifestyle I had while working at 60. I had another tell me I needed 5 to 6 times my highest earning years in my early 50’s to maintain the same lifestyle which worked out to just over a million dollars to retire at 60. I made very good money in my 40’s where I paid for both my children’s education and bought them a car when they graduated while adding the max amount to my 401k. In the beginning of 2008 I had a 7 figure 401K account. At the beginning of 2009 I had a $700 401K account. Add another 15 years of contributions and I was over 7 figures again. Then 2 years ago I got dumped on again where I am back to my 2013 levels. It has gained a little but I lost an unrealized $400k of my retirement. I need to work for another 4 or 5 years and add/gain $35k a year in my 401K to retire as my magic number is no longer $1 million but $1.3 million and I will be 65 or 66 when that happens. FJB

Anonymous
Anonymous

i KNEW It! 1 of 2 distinct possibilities.
1) Time Traveler
2) CPA/MBA with Honors

“At the beginning of 2009 I had a $700 401K account. Add another 15 years of contributions and I was over 7 figures again.”

Are ya gonna party like it’s 2024? Again? Then? ؆

bucknp
bucknp

I’m glad for you. I worked full time many years but never got to the corporate thing with 401k until I was 40. I’m “poorly retired”, happy as a lark, fortunate to have a wife unlike Melania Trump, no debt, I fix things that are broken if I can, hiring a “plumber” is out of the question , going outside earlier the stars are bright, I can identify constellations, uh, lets see, free from the status quo ideologies what it takes $$$ to retire “comfortably”. You would not believe how comfortable our Tempur-Pedic is purchased when I was “making money” , nope no reason to replace it after eight years, still as solid as when new regardless what “they” say about replacing mattresses, Tempur-Pedic rocks, uh, oh yeah, the Zipper cream peas are like monsters, fall gardening is the best here, contender bush beans, still have delicious Crimson Sweet watermelons, uh , turnips , what can I say, each to his/her own and most importantly while I cannot understand sometimes why he took me in, I have Jesus. Nothing in this world will replace my savior.

idaho
idaho

the key for me to retirement was to pay off all my debt before retiring. No car payment (I drive very used cars), no credit cards, no mortgage. You get there by downsizing on your house and cars.

bucknp
bucknp

Sounds as though you live within your means. My step father use to say “it’s what you want”. I guess, but “want” is no big deal anymore, I’ve “got” plenty.

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