Older and Retired Investors

Depending on ones age your portfolio show change as your needs change.  Older and Retired investors need to take a little more conservative approach and start changing their portfolio in that direction from a portfolio that was much more aggressive and looking for growth.  As you approach retirement or are newly retired the conservative changes in your portfolio should be more focused on Income and not Growth.  Your time for Growth in your portfolio is pretty much over with.  Do you keep a little in the growth market.  Yes, I feel that is good.  But that should not be your primary focus anymore.

In the markets you can find many Income Funds.  Most all family of funds have there own product or products for income funds.  But it is your challenge and that of your financial advisor to find the one that is best for you.  My advisor is with JP Morgan/Chase.  Although very good and I like him a lot, he cannot possibly know all the details on all stocks and mutual funds.  He suggested to me a JP Morgan/Chase Income Fund.  Although it was very good, it was not in my best interest and I pointed this out to him as I am very savvy and keep up with things and do my own research.  The Franklin family of funds I found was much better for several reasons.  The cost of stock was lower, the fees were much less, and I had a lot of Franklin family funds already and I would get an additional discount.  The stock is Franklin Income A (FKINX),  This fund is currently trading at $2.36 per share.  It is a very good Income Fund, but there is something you need to remember about Income Funds.  They are not growth stocks.  The price for these types of fund may only move a little in the market, but it is the dividends that generate your income.  The more shares you own the more dividends you will receive each month.  You do have a choice on how you collect your dividends.  Monthly, Quarterly, Semi Annually or Yearly.  You can also chose to have all or part of the dividends reinvested.

These types are funds are very useful to set up in a brokerage account as the government starts making you take money out of your 401K at age 70 1/2.  When they make you take out a payment each year from your 401K and you don't needed it in your pocket for anything.  Just take that money and put it in your Income Fund and allow it to grow a little.  The government makes up a lot of silly rules with 401K's and Roth IRA's but there are ways to make these rules work to your advantage instead of theirs.  Please consult your financial adviser on this.  He should be able to help you beat the system.  By moving your 401K mandatory withdrawals to brokerage account where there are not such rules, you will eventually make the money back in dividends.

Another way to beat the system if you have enough money in your IRA is before you have to start taking mandatory payments from the IRA/401K is switch all your holds in that account to FKINX or other Income Fund.  If your dividends exceed the required amount of withdrawal you simply take the mandated withdrawal by the government and the rest can be left in the IRA for growth.  Thus, you are following the rules and taking the government mandatory payments but your account is generating more dividends than the government requires you to take each year.  This also works with an Inherited IRA like have where I came up with this exact plan.  I make lots more money in dividends that I am required to take by the government and just take out the required withdrawal amount each year that I have set up in semi annual payments in December and July.  Thus, kind of beating the system.

As you approach the age of which you wish to retire you should systematically be converting some of your grow in your portfolio to an Income Fund.  NOT multiple Income Funs, but pick one that is right for you and stay with it.  Some people choose to retire at 62, 65, or perhaps 70.  Some people who are financially able even choose to retire before the age of 62.  But by the time you have set for your age of retirement you should have your growth funds in the amount you wish to convert into an appropriate Income Fund.  I stand by the fact, due to the odds that all MEN should retire at age 62.  You are still allowed to have some income, but it is limited.  But after you turn 65 if you choose to keep working you may work as much as you wish for both males and females.  As females have a longer life expectancy working until age 65 if you work full time and make a good salary then I can get on board with that so long as in good health.  Why?  The life expectancy of men is much shorter than women and this is a fact we surely all agree with unless there is some kind of major health issue that would change this.  Most men that retire at age 65 or 70 will loose in the long run as far as Social Security Benefits if they wait to retire after age 62.  This is a fact that they kind of hide under the pillow and don't tell you much about.  I will give you a personal example.  My father would not retire at age 62, even though I advised him too.  Not only did I advise him of this simply because he was a male, but he also had some health issues like diabetes.  He waited until he was 65 to retire and start collecting Social Security Benefits.  He turned 65 in January and collected 1 Social Security Check and he passed away.  He could have been collecting Social Security Checks for the last 3 years prior had he listened to my advise.  This kind of thing happens more than you think.  And the overwhelming majority of men will never make up the lost Social Security Benefits in their life if they wait to retire at 65 or later.  So guys, don't fall into that trap.

I hope all this information to our older and retiring investors is helpful.  Of  course you are free to add your comments or ask me any questions you may have.

Gus S.


Disclaimer: Make sure to review any information found on this blog site with your personal financial advisor before making any decisions. I am providing general information and not financial advise. I am not a licensed stockbroker or financial advisor.