I am always interested in creating future streams of income akin to a personal pension. I am obsessed with the idea since it is likely I’ll never be involved in a defined benefit or pension plan provided by my employer and I think it has to be terrifying to one day stop your income but still have the same living expenses (i.e. traditional retirement for people) . In the past I have discussed, the liability based pension design, the option to use life insurance to create a pension and even other insurance based products to create that future stream of stable income. So when I saw a Reuters’ Video titled, The Do It Yourself Pension Plan, I immediately was intrigued.
Creating The Do it Yourself Pension from Reuters
Asking four different advisors about a fictitious 60 year old couple with $500,000 to investment Reuters came up with 4 non-mutually exclusive ideas. The names are terrible and do not provide much of a description of the actual technique being used, but each idea is pretty good and deserves a lot more attention.
- Bond Ladders – Not sure why the report gave it that label since there are other parts to it. Notwithstanding this strategy is made up of 36% Muni-Bonds, 34% of other investment grade bonds, 23% Stocks, 2% REITS and 5% Cash. As indicated in the video, they are talking about actual bonds and not bond funds so interest rates are less likely to affect the value.
- Dividend Paying Stocks – Again, a terrible name for what she is offering as an idea (although I like the idea). 60% of stocks (half of which are dividend oriented), 20% high yield or mortgage backed bonds and 20% REITS/MLPs. Anyone that has ever read this site knows I love me some dividend payers, but why call this strategy “dividend paying” if only 30% is focused on the namesake?
- Annuities – 50% in an Immediate Annuity, 20% Fixed Income, 20% US/Int’l Stocks 10% REITS/commodities. At least this name sort of works.
- D.I.D. (Dividends, Interest, Distributions) – Again, couldn’t all the ideas be encompassed in this name? The portfolio is made up of 30% in Equities 45% Fixed Income 25% MLPS/REITS.
I know I am not supposed to because I am only 31 but I love investing for income! There is something about tangible (and often reliable) returns from your investments. I am in still in the middle of building my dividend portfolio, but will absolutely start to look into the other options on this list in the years to come.