Low interest rates have made life a lot easier for many borrowers struggling to make monthly payments. But for retirees, who have to live off their portfolios, low rates have caused huge problems.
A May survey from Gallup and Wells Fargo (WFC) confirmed what many people already know all too well: Low interest rates are destroying people's confidence about ever being able to retire. Fully one-third of those surveyed said that they expect low rates will compel them to work longer and delay their retirement, while 45% of current workers say they think low rates will make it a lot more likely that they'll outlive their money after they retire. In particular, the survey points to deteriorating confidence among retirees. Last year, retirees were much more optimistic about their futures. Yet with core inflation outpacing rates on bank certificates of deposit by more than a factor of three in many cases, those living on fixed incomes are feeling the pinch -- and will continue to do so as higher prices reduce the purchasing power of their nest eggs.
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To fight low rates, some retirees have taken drastic measures to fill their income gaps. Almost 20% of retirees have moved their money into riskier investments they probably wouldn't have bought if rates weren't so low. For instance, some retirees have turned to dividend-paying stocks, many of which pay out more income than bank CDs and other income-generating investments.
No single investment, however, is a perfect solution for income shortfalls. The best answer for most retirees involves using a combination of investments to generate income. Dividend-paying stocks may play a role in your portfolio, but putting all your money into stocks involves far more risk than the vast majority of retirees can afford to take.
Instead, consider other types of income-producing investments. Municipal bonds earn interest that isn't subject to federal income tax, but they also have higher yields than Treasury bonds of the same maturity -- even though you have to pay federal tax on Treasury income. Meanwhile, managed payout funds make fixed payments to their shareholders over time, and even if the income the fund portfolio generates isn't enough to cover a payment, the fund can go in and essentially return a portion of your investment back to you to cover your cash flow needs. These low interest rates won't last forever. But while they do, make sure to do what you have to in order to ensure you have the income you need. For more on making the most of your retirement:
Motley Fool contributor Dan Caplinger is trying to put low rates on his side. You can follow him on Twitter here. He doesn't own shares of the companies mentioned. The Motley Fool owns shares of Wells Fargo. Motley Fool newsletter services have recommended buying shares of Wells Fargo.
Eighteen months after the economic meltdown, why has Washington been unable rein in Wall Street with serious regulation? Bill Moyers speaks with financial journalist Gretchen Morgenson for a candid look at the obstacles facing substantive reform and what Congress' proposed legislation would — and wouldn't — accomplish.
For many of us making more money and getting out of debt is a top priority. Just take a look around at all of the Personal Finance blogs that talk about saving and spending money, as well as making more money so that they can pay off their bills and get out of debt.
My husband and I have a considerable amount of debt which honestly feels quite overwhelming at times. To combat that we work on following these simple steps so that we can still enjoy life, while we work towards becoming debt free.
Think about How Much You Need to Work
When you’re lining up work or contemplating a new job, think about your expenses and make sure you can earn the money you need to live comfortably. Keep in mind how many hours you can work while still having time for the things you love to do.
Consider if you’re eligible to work overtime. A few extra overtime shifts a month could make a considerable difference in paying off some debt.
Consider starting a side hustle doing freelance work based on something you enjoy and are good at.
How Much is Your Time Worth?
When you’re considering a job or a commission, you need to think about making sure you’re getting paid what you are worth. If you are worth more money, don’t take jobs that pay significantly less unless there is a compelling reason to do so.
Try negotiating with your employer for an increase in salary, a higher hourly rate, or a performance bonus structure. If you have experience in a highly specific field it generally earns you a higher salary.
Use Public Transportation
The price of gas is high and it’s only going to go higher. Think about alternative means of transportation and think about what you can do to reduce the wear and tear and the gas consumption of your car in general.
Check out the local bus or train schedules and if they meet your needs, consider selling your car to pay off some debt. Selling a car will eliminate a car loan, gas costs, maintenance fees, and insurance premiums.
Buy Locally
When you’re looking to buy produce, take the time to buy from local vendors. Not only will the food taste better, but you won’t be billed the extra transport costs and you’ll be supporting local business.
Visit the local gift shop for that birthday gift rather than heading to the mall. Or have dinner at a local restaurant rather than a chain restaurant. You’ll likely save money on gas while supporting your local businesses.
Work Locally
If you work close to home you’ll have lower transportation costs and more time to spend with your family. This can make a job worth keeping.
Working locally also allows you to run errands during lunch breaks so you have more family time on the weekends.
Avoid Late Charges on your Bills
Avoid late charges on your monthly bills by setting up automatic payments for the monthly amounts.
Set up online banking so each month your bills will be paid automatically. No more forgetting to mail the cheque or going into the bank!
Budget Your Money
Make sure you know how much money you earn each month and exactly where it’s going. Don’t forget to figure in small costs like gas, dry cleaning, and snacks. Every dollar matters when you’re trying to get out of debt.
Call your utility companies and ask to be put on their budget plans. Paying the same amount each month for electricity or oil is much easier than paying a $600 bill during the cold winter months.
Ask Yourself: Do I Need It?
Impulse buys can take a real toll on your cash flow. Before you buy anything, give it a second thought and discuss it with your spouse or friend. Can you get it cheaper elsewhere? Do you even really need it?
Walk away for a day and think about whether you really need to spend the money or ask the salesperson if the item will be on sale soon. But chances are you really don’t need it in the first place.
Keep the Thermostat at a Reasonable Temperature
When you want to keep your bills low, you will find that one of your heftiest bills will be the heating bill if you live somewhere cold, and the AC bill if you live somewhere hot.
Learn to wear layers of clothing and agree on a preset temperature with your family. Installing an electronic thermostat allows you to program the times and the temperatures so no one has to touch the thermostat.
To help deal with warmer temperatures make sure your blinds and draperies are closed all day long to block out the heat. Try using fans to circulate the air, and of course wear lighter clothing. Of course when it hits 100 degrees as it has recently in many parts of the world, nothing beats turning on the AC. You might just have to eat less next month.
Buy Good Quality Items
It might seem counterintuitive, but buying more expensive things that are of a higher quality can be useful when you’re looking to save money. Quality things break less frequently so you don’t end up buying the same items over and over.
This doesn’t mean you have to shop for designer clothing that’s out of your budget range. Simply look for higher quality items and buy fewer clothing pieces this season.
Being conscious of how much money you spend each month is critical to getting out of debt, but that doesn’t mean you have to live like a hermit without any entertainment. Choose some of these easy ways to save money and enjoy living your life simply!
If you are a frequent traveler, and you enjoy the finer things in life, the Starwood Preferred Guest credit card from American Express might be just the card for you. The Starwood Preferred Guest credit card features a fairly generous rewards program. That’s something that we don’t see a lot of Canada. As long as you...
Non-registered investment accounts have no special “tax status” the way registered accounts, such as RRSPs or TFSAs, do. All investments held in these accounts are subject to tax, but not all investment income is taxed in the same way or at the same rates. Some investment income attracts less tax than others. ► MORE
What the heck is a #yolo or YOLO? It’s a term used by the younger generation which is simply: You Only Live Once and it seems to be used to explain some very odd behavior by some normally sane folks. This expression also flies in the face of a lot of organized religion (not to [...]
I’ve often read “dividends don’t lie” and I believe there is a great deal of truth to those words. Companies can either afford to reward shareholders or they can’t; the evidence of company stability can be measured in part by dividends paid over decades of time. For some companies, while capital appreciation can be tremendous, the trick [...]
So is over-spending. But I won’t get into that here.
I had a question from a reader asking what my Myers Briggs type is – and it’s INTJ.
Despite the rarity of that personality type (aren’t we all such special snowflakes though?), there’s been some anecdotal surveys that determined that INTJ’s are overly represented amongst the early [...]
Anyone who had feared that Hollywood had lost interest in films based on comic books can rest easy. Marvel's The Avengers, an epic superhero team-up starring Robert Downey Jr. and Scarlett Johansson, has set records on the way to taking in more than $1.4 billion at the worldwide box office. Enthusiasm for The Avengers is both a symptom of and a booster for enthusiasm about comics in all forms: movies, TV series, and, of course, books. Call it the Silver Age of comic book media -- it'll be on gilded display starting Thursday at San Diego's annual Comic-Con, which draws more than 125,000 fans each year. (Nearby and can't wait? Preview night starts at 6 p.m. Wednesday.) Publishing parallels Just as the comic book publishing business had its Golden Age with the introduction of Batman and Superman in the 1930s, followed by a Silver Age that saw the likes of the Spider-Man and X-Men books come to the fore, comic book movies are enjoying a run not seen since Christopher Reeve and Michael Keaton brought Superman and Batman to the screen in the 1980s. Skeptics might find that surprising, if only because -- until recently -- comic movies had been the source of just as many misses as hits. Avengers prequels Captain America: The First Avenger, Thor, and Iron Man 2 were the rare winners in the four years since Christopher Nolan's 2008 epic, The Dark Knight, turned out audiences in record numbers. Box-office losers Green Lantern and Cowboys & Aliens dominated last year's headlines. Lifting the curtain... on a big pile of cash But if 2011 was a bust at the box office, 2012 is turning out to be a bonanza: Of course, this list doesn't include the final installment of Nolan's Batman trilogy, The Dark Knight Rises, which debuts nationally next week on July 20. Naturally, Time Warner (TWX) and the folks behind the film will use the San Diego convention to promote it to fans.
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But that's also just one of what are sure to be several important SDCC news events for those who invest in entertainment stocks. For example, CBS (CBS) owns premium channel Showtime, which recently purchased the rights to make the Image Comics series Chew, about a USDA "agent" who solves crimes by getting psychic impressions from what he eats, including -- from time to time -- people. (Yuck!) Executives might use SDCC to provide production details. After all, this isn't the first time TV executives have fallen for edgy comics. Image also distributes the comic book The Walking Dead, now a popular cable series for AMC Networks (AMCX). Season three is due to kick off in October. The Real World of Comic Books Fandom and the business of comics are also getting more airtime. On YouTube, The Nerdist Channel, created from the popular podcast of the same name, broadcasts "Comic Book Club" for entertaining reviews of newly published comics and "Just Cos," a show about "cosplay" -- a fancy term for dress-up where the subject is usually some sort of known movie, TV, or comic book character.
AMC, meanwhile, has ordered a second season of the niche reality show Comic Book Men, starring writer and director Kevin Smith and friends who run a New Jersey area comic book store. National Geographic Channel has a competing series called Comic Store Heroes, which debuts on Friday. Three Ways to Profit All of which is to say that the business of comic books is huge and getting bigger by the day. That's an opportunity for investors who buy with an eye toward how comics will influence profits. Here are three potential winners:
Walt Disney (DIS): Though Disney is already a winner because of The Avengers, investors may not realize that the House of Mouse also renegotiated a deal last year with Sony (SNE) that required the two companies share merchandising receipts from Spider-Man films. No longer. Disney gave up its rights to a share of the box-office haul from Sony's Spidey flicks in exchange for exclusive merchandising rights to one of Marvel's core characters. Smart.
IMAX (IMAX): The inventor of the large-screen viewing experience should see a boost when The Dark Knight Rises debuts at the end of the month. Several scenes were shot in the IMAX format, and more than 100,000 tickets have been sold already. A good portion of the proceeds is likely to be for premium showings.
Time Warner: Quite possibly comic book central when it comes to businesses benefiting from the shift. Not only is the company home to DC Entertainment, and therefore poised to profit from The Dark Knight Rises, but it's also owner of HBO and Warner Studios, which produces The Big Bang Theory, whose main characters regularly spend onscreen time at a comic book store.
Meanwhile, back at the Hall of Justice ... What about investing in the comics themselves, you ask? Heritage Auctions is preparing a sale of rare high-grade comics from the 1960s that could fetch as much as $9 million -- several orders of magnitude more than what Joe or Jane Collector would have paid buying them off the newsstand years ago. And that's awesome. Trouble is, there's no way to know precisely which comics are going to fetch millions in later years. Comic book values have more to do with desirability and rarity; stocks are priced according to their ability to generate cash flow. So enjoy comics. Introduce your kids to them. Take in a comic book movie or two. Just don't bet your retirement on a comic book collection. Instead, bet on the companies that make reading and collecting comics possible in the first place. Motley Fool contributor Tim Beyers is a longtime comic book collector who owns more than 2,300 comics. He also owned shares of Walt Disney and Time Warner at the time of publication. The Motley Fool owns shares of Walt Disney and has sold shares of Sony short. Motley Fool newsletter services have recommended buying shares of Walt Disney and IMAX.