If you’re close to retirement, you should be most alarmed.
Liberty Vouchers offer a defense. They could pay you $1,175 in income every 20 days.
Call it friendly fire, if you will. Our Federal Reserve is the aggressor.
Its low-interest-rate policies of the past decade mean quality bonds, certificates of deposit, savings accounts, and money market accounts continue to offer little investment income.
It was different back in the glory days of real interest rates.
These go-to conservative investments offered income yields of 5% or more before the Great Recession of 2008/2009. Today, you’re lucky to receive a 2% yield.
I say “lucky” sarcastically.
The deal dealt by the Fed is less than ideal for most income investors. When inflation and taxes are factored into the equation, you’re nearly standing still.
The Fed appeared to be on our side only six months ago.
Fed officials gushed over the prospect of raising interest rates. Yields on safe income investments would rise. Income investors would no longer need to reach into the thorny thickets of risky investments for real yield.
Well, so much for appearances.
We’re halfway through 2019. The Fed has implemented one rate hike. Few Fed watchers believe another will be forthcoming.
The smart money is betting the Fed does a 180-degree turn: instead of raising interest rates three times this year, it will cut them three times.
Investors have reacted accordingly.
The 10-year U.S. Treasury note – a bellwether security – offered a 2.66% income when we entered 2019. It offers a 2.09% yield today.
As the yield on the 10-year note goes, so go market interest rates.
This means those 5%-or-more yields we long for on traditional safe investments are no more than a mirage. They’ll likely remain one until a time in the distant future.
So, back to the thorny thickets. If you want real income, it’s riskier investments or nothing.
Dire perhaps, but not hopeless.
Riskier investments include blue-chip stocks like Exxon Mobil (NYSE: XOM), which is priced to offer a 4.6% dividend yield. A $10,000 Exxon Mobil investment would secure $460 in annual dividends this year.
More yield is found in Altria Group (NYSE: MO), another blue-chip dividend payer. Altria shares are priced to yield 6.4%. A $10,000 Altria investment will get you $640 in dividends.
Both companies have decades of annual dividend growth to their name. I’m confident that annual dividend growth will persist for both companies this year and for many years thereafter.
You’ll need time, though, to reap the benefits.
Exxon Mobil and Altria are likely to pay double the amount in annual dividends they pay now, but that’s 10 years out.
And what if you lack the funds to invest more in each stock to collect more immediate income?
A 2019 Vanguard study shows that $58,035 is the median 401(k) account for those 65 and older. That’s a modest sum to work with, and it shows.
The average retired American has an $878 shortfall between monthly income and expenses. The Fed’s war on investment income only hinders the effort to close the gap.
Liberty vouchers to the rescue.
Many offer income yields of 20% or more. We even found one that offered a 41.2% income yield.
Liberty vouchers are paying $1,175 every 20 days (on average) to investors with only modest sums to invest.