Everything You Need To Consider For A More Secure Retirement

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 |  Includes: EXC, GE, INTC, JNJ, NLY, T
by: Regarded Solutions

Prior to offering my opinions and suggestions, let me state that there are no "cookie cutter", sure-fire, risk-free, perfect products or stocks that guarantees ANYONE a completely safe and secure retirement. Of course, if you have trillions of bucks and spend it wisely, you SHOULD be just fine. But most of us can't even come close to that.

As I have stated before, in previous articles, (such as this one ), there is no free lunch and every option you might select has some risk. Even placing all of your money under a mattress has more risk than investing it.

If you are thinking about retirement, are ready to retire, worried about retiring, or already retired, this particular article has been written for you me, and all long term investors who plan to buy, hold and watch.

There are a myriad of products and stocks available for everyone's taste, risk tolerance, needs and desires, a few of which I touched on in this well received article.

Bottom line, everyone should do the research required and truly understand where they stand with regard to their ability to retire comfortably. That will add much more meaning to any article or book written on the subject of retirement.

Investing and Utilizing Actionable Strategies Are Key to a Secure Retirement

I maintain that by using some fundamental strategies, and investing wisely with a diversified portfolio, you can achieve retirement goals.

What are these strategies?

1) Invest in sound, well-heeled, dividend paying, growth stocks:

There are so many companies that fit this criteria, that it would fill this page to list them all. Here are several of my personal favorites: Annaly (NYSE:NLY), AT&T (NYSE:T), Exelon (NYSE:EXC), General Electric (NYSE:GE), Johnson & Johnson (NYSE:JNJ), and Intel (NASDAQ:INTC). We have a financial, a telecom, a utility, a drug, and a tech company. I would say this is well diversified and will mitigate the general ups and downs of the market.

  • NLY: Current yield-14.2%; $16.98/share with a P/E of 6.31 is a buy.
  • T: Current yield-5.9%; $29.74/share with a P/E of 15.04 is a buy.
  • EXC: Current yield-4.8%; $44.57/share with a P/E of 11.11 is a buy.
  • GE: Current yield-3.5%; $17.25/share with a P/E of 13.17 is a buy.
  • JNJ: Current yield-3.5%; $65.60/share with a P/E of 16.00 is a buy.
  • INTC: Current yield-3.4%; $24.98/share with a P/E of 10.82 is a buy.

I believe that these stocks are undervalued, solid performers, have great growth potential, obviously offer fine dividends, and have P/Es below average which to me signals a buy on all counts.

2) Re-Invest the dividends until you need the income stream:

While you are still working, and have the income coming in, throw the dividends back into the stocks you select, and grow your portfolio in a dollar cost averaging way, using those dividends. They grow exponentially, and will give you even more when you need to use the dividends as part of your income.

3) Use an option strategy to maximize returns and hedge for the dips:

Writing covered calls against an underlying stock will give you immediate cash to be used for anything you want. If the shares do not get called, you can do this over and over and over. If the shares do get called, you can buy the stock back anyway. In turbulent times, you should also buy in-the-money puts (paying for them with your covered call money) and protect yourself quite nicely on the dips.

By using an option strategy you generate cash flow, and hedge shares owned for a safety net. Nothing is foolproof, but this IS a great way to go, and you can take action NOW.

4) Keep an eye open to trends, politics, and the world around us:

The world changes every day, politics shape much of our lives, and trends can help us select new stocks to buy as opportunities given your risk tolerance. If we ignore this, we are not doing ourselves a service, and cannot take action on our investments, simply because we are not watching.

A sound approach is to BUY, HOLD, and WATCH EVERYTHING.

It is ACTIONABLE, STRATEGIC, and PROFITABLE

Lets go over some basics to consider as well, as this ties into your overall investment strategy and will give you the greatest opportunity for a safe, sound, and secure retirement:

Cash For The Basics

Your expenses will determine the amount you should initially have for that scary first year of retirement, so make certain you have them under control. I am going to make a suggestion that is sure to raise eyebrows and ruffle some feathers, however, in our current economic climate of low interest rates and yields on fixed investments, and a turbulent market and frothy bond market, I am suggesting that you allocate ZERO dollars towards Treasuries. The yield is currently at 2.30% for the 10 year, and 3.35 for the 30 year. Paltry at best, plus you can lose principal if you sell them when and if the bottom drops out of Treasury prices.

CD rates are just as awful, with some yielding not much over 0% for the short term.

So what am I suggesting? It is my opinion that in the uncertain times we are in right now, we should have enough LIQUID funds available to us to pay our BASIC needs and requirements for 5 years. Tuck it away in an FDIC account or several, so that it is there for you to pay for your BASIC needs. DO NOT TOUCH THAT MONEY.

Here are the basics that should be covered:

  1. Food
  2. Shelter
  3. Health related expenses (insurance)

Yes I know I have left a ton of expenses out, but these are the basic, cannot LIVE without ones that I am suggesting you have a 5 year reserve account for.

Once you have that 5 year amount set aside, move on to other things, like reviewing your situation at least once a year, evaluating it, adjusting it as required, and of course, keeping an eye on INVESTMENTS.

For the sake of this article I have selected 3 scenarios that most people will be able to relate to, either closely, spot on or not at all but will "get the picture". Then we can take each scenario and evaluate how much money will actually be needed to spend and invest, after basic needs are covered, for at least 5 years.

I have created a married couple, ages 66 and 65, both eligible for Social Security and Medicare, no company pensions, and with a modest portfolio. This married couple will fall into each scenario, and if they differ from YOU in any way, remember that this is to be used as a suggestions. Some folks might be better off, and some might not be.

Scenario #1

Family Yearly Income at Retirement: $50,000

  • Savings: $100,000
  • Yearly Food Expenses: $6,000
  • Yearly Shelter Expenses: $12,000
  • Yearly Health Expenses: $12,000
  • Basic Needs Expenses: $30,000/per year

Yearly Income For Retirement: $19,500

  1. Social Security For Person 1: $13,000
  2. Social Security For person 2: $6,500
  • Total Reserve Required Per Year: $10,500
  • Total Reserve Required For 5 Years: $52,500
  • Balance Remaining From Savings: $47,500

Scenario #2

Family Yearly Income at Retirement: $100,000

  • Savings: $250,000
  • Yearly Food Expenses: $7,200
  • Yearly Shelter Expenses: $20,000
  • Yearly Health Expenses: $15,000
  • Basic Needs Expenses: $42,200/per year

Yearly Income For Retirement: $27,000

  1. Social Security For Person 1: $18,000
  2. Social Security For Person 2: $9,000
  • Total Reserve Required Per Year: $15,200
  • Total Reserve Required For 5 Years: $76,000
  • Balance Remaining From Savings: $184,000

Scenario #3

Family Income at Retirement: $150,000+

  • Savings: $500,000
  • Yearly Food Expenses: $10,000
  • Yearly Shelter Expenses: $25,000
  • Yearly Health Expenses: $20,000
  • Basic Needs Expenses: $55,000/per year

Yearly Income For Retirement: $36,000

  1. Social Security For Person 1: $24,000
  2. Social Security For Person 2: $12,000
  • Total Reserve Required Per Year: $19,000
  • Total Reserve Required For 5 Years: $95,000
  • Balance Remaining From Savings: $405,000

Now that we have our scenarios, please remember that all individual numbers will vary according to the uniqueness of the individuals. These numbers should only be used as board guidelines.

As stated before, my other articles on retirement were written to support this one, offer even more stock suggestions, and all can be used as a guide for a potentially well grounded, safer retirement by investing wisely, spending wisely, and having the flexibility to re-evaluate your situation on a regular basis.

Disclosure: I am long NLY, JNJ, T, EXC, GE. I also hope to add INTC to my portfolio sometime next week.