For most people, their 60s is when they begin to feel wealthy. They can cash out their 401Ks and Roth IRAs while receiving social security.
If they are fortunate, they also receive a federal, state, or local government pension. However, just because they have cash flow doesn’t mean they should stop investing.
Welcome back to the Stock & Bond Investing at Any Age series (20s, 30s, 40s, 50s), where we create income for our entire lifetimes.
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Please take the time to review other articles related to your 60s. The 60s can be a magical time if you take the time to prepare and execute.
- Retirement Planning in Your 60s (Amazon)
- Real Estate Investing in Your 60s (pdf)
- Staying Debt-Free in Your 60s (pdf)
- Dividend Investing in Your 60s (Amazon)
- Bond Investing in Your 60s (pdf)
Creating your own income. I’m not a huge fan of 401Ks because they are just saving accounts, but far riskier.
Workers arrive at age 60 with, say, $500,000 in their 401K and have no knowledge of investing, saving, creating income, or how to withdraw safely.
Of course, a financial advisor is waiting in the lurch, ready to help them out—at a cost. It’s a lot of money to access without any requisite information.
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Most people lack confidence in the markets (real estate, crypto, business, stock, bond, commodity), so they defer to someone else. Today, I want to give you some basic information about stocks and bonds.
The four pillars of a successful retirement. The four pillars of a successful retirement are safety, security, growth, and income.
The first step is to envision your dream retirement. You may only need a little income if you plan to stay local and attend the VFW (Veterans of Foreign Wars) every night.
If you plan on traveling the world with your spouse and adult children, you will need much more cash flow. You’ll need to invest at a higher yield to earn more income.
Two People, One Budget
I like to put a number on my dreams. Let’s say retirement #1 needs $5,000/month, while retirement #2 needs $10,000/month.
Allocating your resources for success. I would love to throw all my money into high-yield products and call it a day, but that’s not the best route.
I must allocate to all four pillars to earn $10,000/month safely. Let’s take a look at some example portfolios.
Safety. Safety refers to your emergency fund. In your 60s, you truly need one year of expenses. Keep in mind, that your emergency fund doesn’t need to cover your entire monthly lifestyle.
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Your expenses can be your food, mortgage, transportation, and utilities. Without a mortgage, it should be around $2,000/month.
Therefore, you can keep $24,000 in a high-yield savings account, which currently pays excellent interest.
Security. The security pillar refers to bonds. Bonds don’t offer the best returns but keep our principal intact and safe. We invest in bonds for the duration (hold to maturity).
You can invest safely in Series “I” and “EE” bonds without much penalty if you need to withdraw early. However, you can only buy $10,000 of each per year. “EE” bonds take 20 years to double, so they may not be the best investment at age 60.
Social Security vs. Income Investing
Depending on your additional income (pension, social security), you can allocate heavily toward treasury notes and bonds (5-30 year increments).
Bonds will give you a 4-5% return, which will not be enough to beat inflation and other rising costs. However, bonds are there to keep your income steady during market downturns. Call them “peace of mind” investments.
You can also tailor your bonds to mitigate federal and state taxes, use them for educational expenses, and start investing for kids.
Growth. Most people forget about the growth pillar; however, it is vital to long-term retirement survival.
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To achieve a safe and healthy retirement, you need to allocate some capital toward the stock, bond, and real estate markets.
You can do this by investing in index funds and ETFs. My favorite index fund is Vanguard Total Stock Market (VTI). You can pair it with Vanguard Real Estate Fund (VNQ), and you capture your growth vehicle.
You can also take the time to build a dividend growth investing portfolio. DGI takes a few years to see massive results, but if you plan on living to 85-90, having a DGI portfolio would be ideal.
Some great DGI stocks are McDonald’s (MCD), Costco (COST), and Starbucks (SBUX). A DGI portfolio gives you capital appreciation and income.
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If you don’t want to pick individual stocks, you can dollar-cost average into a Dividend ETF like Schwab High Dividend Fund (SCHD).
Income. The Income pillar is by far my favorite but requires the most knowledge. Investing for income is simple if you understand the nuances (the hard part).
The idea behind investing for income is to receive your return today, not tomorrow. Most high-income products won’t give you excellent capital appreciation, so index funds can help round out your total returns.
You want to learn the six types of income-investing products and determine your income goals. Once you have your numbers, you can allocate the correct portion of your windfall to income.
Putting it all together. Let’s say you need $10,000 a month of income from all sources. You receive $2,000/month for social security and $2,000 from a pension.
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That means you need to generate $6,000 monthly from your $500,000—you cannot do that safely.
However, this is where you must think outside the box. Ensure you create your emergency fund, security pillar, invest in index funds, and DGI portfolio. You can do all these once and forget about them.
You should have about $200,000 remaining for your income investing portfolio. A 10% yield would give you $1,600/month in dividends.
Conclusion. However, you don’t need to generate all of your cash flow from investing in stocks and bonds.
Think of ways to barter and trade your services. Start walking a dog for your neighbor and get roommates.
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Within five years, you can quickly build your income investing portfolio to $6,000 per month. It takes a lot of effort and focus, but you will be retired and have time.
Meanwhile, your other pillars will continue to compound independently, ensuring you beat inflation and keep up with the market.
Retirement is not about living in a box but thinking outside the box. Your income investing portfolio is the key to a successful retirement; however, you’ll need all the other pillars to protect it.
By building all four pillars, you ensure your income investing portfolio can do what it does best: provide cash flow to your household. Good Luck!
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Disclosure: I am not a financial advisor or money manager, and any knowledge is given as guidance and not direct actionable investment advice. I am an Amazon Affiliate. Please research any investment vehicles that are being considered. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. All Right Reserved Military Family Investing
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