My employer is selling us off and the first thing we learn is they will no longer be funding our pension. I imagine the 401k is next, and if so, I will write about that rollover in a later post.
I got my pension letter several weeks ago. I will receive $280 per month when I hit 67. Care to guess what $280 will buy me 12 years from now? Right, not much.
If I live to be 87 I would collect $67,200, at the $280 per month. That’s almost twice the estimated cash option of $34,000, available 12/31/16.
I put together a portfolio of 10 different stocks and funds that, as of the funds prices on 11/19/16, will generate a near 10% return. Now, my $34,000 pension cash option, split evenly between these 10 equities, could grow to $106,706 in 12 years, age 67. That would produce $889 per month in income, a lot better than the $280.
CalculatorPro will calculate how much a starting amount will grow, given a specific interest value, for a specific number of years. Of course this calculation is a bit low because my portfolio pays dividends monthly and quarterly and are reinvested back into the same 12 equities throughout the year automatically, not at the end of 12 months.
CalculatorPro will calculate that my $106,706 balance will generate $10,670 in dividend income given a 10% interest return after 1 year, or $889 per month.
If you are reading this, thinking about rolling your pensions cash value into a Traditional IRA, then I would warn you. I am not a financial consultant and have no formal training. Basically, my plan is my plan and it is up to you to make your own financial decisions.
If my pension cash value was $100,000 I would split it into thirds and implement 3 different and unique strategies, the 10 equities below being just one strategy. If I had $200,000 I’d spit into 5 chunks. You too should balance your investments so that all your eggs are not in the same basket. DIVERSIFY. Ideally you first want to build a cash emergency fund and make a plan to get out of debt as soon as possible, and/then grow at least 5 income streams; Social Security, HSA, 401K, CD Ladder, and IRA dividend income from several stock/mutual fund/ETF/CEF strategies. If your married. and your spouse works, you may also grow her 401K and IRA, and with his/her Social Security, you would have 8 income streams.
My 10 Equity Cash-Option Pension Rollover Portfolio
The first four equities are Real Estate Investment Trusts (REIT’s). By law, these companies must pay at least 90% of their profits out to share holders. These four companies are the cream-of-the-crop and own a tremendous amount of real property that generates enormous rental income. They deserve a 40% allocation to this portfolio.
Five and six are mortgage REIT’s. They are highly rated and generate substantial dividends. Almost everyone has a mortgage, almost. These ETF’s, Exchange Traded Funds, are highly liquid and will generate dividend profit for many, many years to come.
Seven and eight are energy related. Seven is also an ETF. The fund owns stock in about 25 companies called MLP’s (Master Limited Partnerships), all oil and gas related, in all sectors of the energy related business. Eight is a multifaceted energy/transportation related company in the shipping business.
Nine and ten represents a 20% allocation to the bond market. They are taxable high-yield bond funds.
You’ll see the Sector then name of the equity, stock ticker symbol, the price of 1 share on 11/19/16, the one-year dividend interest paid at the listed price, the pay schedule, then what they own or do. To get to an overall dividend interest amount the portfolio generates, as of 11/19/16, you simply add all the interest figures together and divide it by 10. It comes to a little over 10%.
1) Real Estate REIT | Stag Industrial Inc. | STAG | $22.71 | 6.16% | Monthly
Owns 290 industrial type buildings in 38 states.
2) Real Estate REIT | LTC Properties Inc | LTC | $44.97 | 5.07% | Monthly
Owns 98 skilled nursing facilities and 109 assisted living facilities.
3) Real Estate REIT | Realty Income | O | $55.15 | 4.40% | Monthly
Owns over 4,600 properties in 49 states.
4) Real Estate REIT | Lexington Realty Trust | LXP | $10.21 | 7.01% Monthly |
Owns a diversified portfolio of 199 properties, office, industrial, and retail, in 40 states.
5) Financials mREIT | Chimera Investment Corp |CIM | $16.52 | 12.11% | Quarterly
The company, through its subsidiaries, invests in residential mortgage-backed securities (RMBS), residential mortgage loans, commercial mortgage loans, real estate-related securities, and various other asset classes.
6) Financials mREIT | Blackstone Mortgage Trust | BXMT | $30.22 | 8.21% | Quarterly
A real estate finance company, originates and purchases senior loans collateralized by properties in North America and Europe.
7) Energy | Ship Financial Intl. | SFL | $13.85 | 13.00% | Quarterly
Owns and operates vessels and offshore related assets in Bermuda, Cyprus, Malta, Liberia, Norway, Singapore, the United Kingdom, and the Marshall Islands. The company operates in various sectors of the shipping and offshore industry, including oil transportation, dry bulk shipments, chemical transportation, oil product transportation, container transportation, car transportation, drilling rigs, and offshore supply vessels.
8) ETF of MLP’s | InfraCap MLP ETF | AMZA | $10.73 | 14.28% | Quarterly
An Exchange Traded Fund that buy’s a basket of MLP’s.
9) Taxable Bond | PIMCO High Income Fund | PHK | $8.64 | 14.11% | Monthly
10) Taxable Bond | Credit Suisse High Yield Bond | DHY | $2.52 | 11.36% | Monthly
Again, this portfolio is just 1 of several unique strategies I am building, or planning to build. It is high-yield low risk. It’s sole purpose is to take “found-money” and use a not-so balanced sector mix of ten equities, automatically reinvesting the dividends, until the portfolio hits $100,000 in value and produces about $900 in dividend income per month.
Bogleheads is a complete and comprehensive resource on all things INVESTING.
Lazy Portfolios is a great resource with examples on how to build, and what funds to buy, to create a balanced portfolio using Vanguard or Fidelity funds.
AssetBuilder has so-called “lazy portfolios” specifically built for Vanguard Funds. A really simple automatic hands-off approach to investing.
This page here on my site has links to great dividend paying companies, and two strategies I follow.
This page here on my site has a simple strategy to get, and stay out of debt, FAST.
Someone at work said that you will never get rich working here. This was said in a group of about 10 guys and I said BULL.
Sure, you won’t get Gates or Trump rich, but you can get 5 to 7 hundred thousand dollars rich. For guys punching a clock like me, having over half a million bucks worth of investments, paying me cash every month, is being rich. A care-free (rich) retirement is having an income equal, or greater than, I had when actually working.
To win the game working men like me play, one’s goal should be to try to produce the right mix of investment income ASAP. When you retire at 65, or whenever, you want an income that 1) is as near, or greater than, to what you earned working, and 2) investment income that grows from year-to-year.
This game, like all games, has winners and losers. It takes insight and discipline to win. It is unattainable to the pessimist and the undisciplined. You must LEARN how to consistently save two coins, or more, out of every 10 you earn. If you can LEARN to save, you then must LEARN how to turn those saved coins into safe, cash generating revenue that snowballs. To really win at this game you have to take the time to read and LEARN different investment strategies and incorporate these unique strategies separately into each of you, and your spouses, retirement accounts.
Discipline CAN BE LEARNED. You CAN budget and run a surplus of cash and still vacation and have fun. You CAN create a $10,000+ emergency fund. You CAN erase all your debts within 3-4 years, then pay off your house in another 5 or 10. You CAN put enough in your 401k to take advantage of your employers matching funds and open, and fund, a Traditional IRA. A good plan is to work to pay off everything by the time you hit 60 then work 3 or 4 years more and save every penny you can.
It might sound a little hooky but, if you are younger than me and never played the game Monopoly, I’d suggest you buy the game and play with your kids, family, and friends. When I was a kid we played it all the time. It will teach you the real value of money, how it is earned and lost, and how to invest that money by purchasing income producing securities, that being real estate. I said it earlier; money doesn’t come easy for a lot of us, we have to work hard to get it. Wealth is a blessing from our Creator and a precious thing. Money is not the only thing there is, or the most important thing, but something I believe we are entrusted with, and expected to be, caretakers of. The Bible is full of references to money and investing. Study Solomon’s writing’s about wealth and investing and the Parable Of The Talent’s.
Look over my site, there are several good pages, and posts, to help get your financial path straight.
God Bless You!
Just some of the resources that contributed to my 10 eguity picks are below…Warning! Advice becomes outdated and one adviser contradicts another. A lot of these “advisors” are really trying the sell you something, or have another agenda. The best you can hope for is studying several opinions, from several resources, then take action. Buy and hold and don’t sell at a loss during market down-turns.