Panning for YIELD, what you need to know!

As retirement approaches, the golden glow of yield grows brighter!

How much money do I need in my retirement account? The better question is, “How much can I withdraw from my nest egg without running out of money?” The risk of running out of money, of out living your savings, is real. Since this is the case, many entering and nearing the retirement years are deciding to focus almost solely upon the current yield of an investment. With an ever increasing number of people seeking higher current returns, what do we need to know in order to avoid running into the proverbial ditch? Let’s look at two examples.

Is it time to shift our mortgage into reverse?

On August 30, 2016, Financial Advisor Magazine Online published an article, “Home Is Where the Retirement Security Is.” The author touted home equity as the often neglected golden nest egg for retirees. He mentioned it could help provide funds for high cost assisted living or nursing home expenses, as well as provide wealth to leave for children and grandchildren. On October 3, 2016, the same periodical posted another article from a different author, “Reverse Mortgages Ain’t All That Great.” This writer mentioned the significant risk of the reverse mortgage consuming the home equity, because even a reverse mortgage has to be paid at some point in time. Both writers are correct! A reverse mortgage can be an effective tool in the right circumstance, but they are not without risk.

To REIT or not to REIT?

Real Estate Investment Trusts have been offered to investors seeking income for more than 50 years. With interest rates being at or near zero, REITs look increasingly attractive. In the days preceding the writing of this post, hundreds of articles were posted in online financial journals about them. “Risky REIT Sectors to Watch Out For.” “REIT Correction Ahead: 4 to Sell Now, 3 to Buy.” “2 REITs to Avoid, 3 to Buy Now” (from the same publication as the previous). “5 REITS to Buy Now And Hold Forever.” Should I avoid Mortgage REITs? Would REITs based in Health Care properties be attractive with an aging population? What is someone to do?

Gather information widely, make investment decisions carefully!

This sounds like the obvious conclusion since both the examples show the contradictory nature of investment information. There are two things we cannot afford to do, 1) allow the overwhelming amount of information cause us to freeze without making a decision and 2) make a decision someone else suggests with which we are not comfortable. In both examples above, what someone recommends as a good idea, another says should be avoided. Remember, not making a decision is actually making a decision to do nothing. While this might be appropriate for a short period, over time deciding to do nothing will produce nothing. Since we cannot blame investment mistakes on someone else (unless we have given them permission to handle our money without our knowledge), we should not make investment decisions about which we are uncomfortable. Who said retirement would be simple?