You may have seen the quips about how this year the 401k accounts of many have become “201k” accounts this year due to the bear market for both stocks and bonds.
So if you want to be able to stop worrying about your retirement income, read on…
2022 has proven the traditional retirement planning model of a 60/40 portfolio of stocks and bonds, with 4% annual withdrawals to fund your retirement, doesn’t work. For a retiree counting on living off an investment portfolio, following the traditional plan means selling stocks or bonds at a loss and taking a 25% to 30% cut in their retirement income.
If you need to keep the same income, your retirement account will draw down much faster than the stock market losses plus withdrawals. Once you get behind due to a bear market, your account can never catch up, and your well-crafted retirement plan will go up in smoke.
Steep market declines come along about once a decade. Each time retirement savings are decimated. Yet financial advisors continue to use the same strategies. The retirement savings investment guidance from the financial industry has not changed since I became a Certified Financial Planner in the 1980s. Those strategies continue to get “blown up” every decade or so, and it’s not the financial planners who suffer the consequences.
For my Dividend Hunter service, I developed a different strategy. I believe a retirement portfolio should generate enough cash earnings to provide a retirement income and retain some cash to reinvest to provide a growing income.
Think about that idea compared to your current retirement savings. Do you earn enough in cash income to retire, or does your retirement plan depend on stock price appreciation to ensure a comfortable retirement? If you are counting on price appreciation, 2022 should show you how that strategy can fail at any time.
The 30 or so investments in my Dividend Hunter recommended portfolio generate an average yield of over 8%. That’s double the 4% withdrawal rate recommended by traditional financial planning guidelines. More importantly, the 8% cash flow will steadily continue, no matter what happens to stock and bond prices.
Many Dividend Hunter subscribers have told me how finding the Dividend Hunter service has helped them invest and plan for a worry-free retirement. If you worry about your retirement, it’s time to check out the Dividend Hunter below.But I like to share one good, income-focused investment idea with each article. The InfraCap Equity Income Fund ETF (ICAP) is a new (launched January 2022) fund that pays stable monthly dividends that should grow over time. ICAP currently yields 7.8%. This ETF would be a good starting point for building an income-focused retirement portfolio.