A recent widow in her seventies came into my office in Jerusalem for an initial meeting on how to increase her investment income. She said that the $25,000 per year from her portfolio and pensions was simply not enough income to maintain her lifestyle.
The pension stopped – Oy!
Her husband’s pensions stopped when he died, and her monthly income dropped significantly. “I’m afraid, Doug,” she said, “that I’ll be forced to move out of Jerusalem. I love living here, but it’s just so expensive.”
(Note, that it is important to set up your pension to include a spousal benefit, even if it means taking a slightly smaller payout during your lifetime.)
Could changing your investments mean you don’t need to lower your budget?
When I looked at her monthly brokerage statement, I could quickly see that the portfolio of low-dividend stocks was simply not appropriate for her. Her current portfolio had a lot of risk exposure and not much income. She had a few short-term bank deposits (CDs), but that hardly moved the needle. “Have you considered owning some bonds?” I asked. She laughed and told me that the friend who had sent her to me had said that I would bring up bonds.
Why a lot of retirees use bonds to increase investment income
Although they do have risks, bonds normally provide fixed income that is higher than a lot of other investments offer. They pay interest every six months, and if you have a few different issues in your investment portfolio, you can create a regular cash flow throughout the year. If you’re looking for more income from your investments, consider meeting an investment professional to review how bonds would fit into your financial plan. At the same time, ask if “brokered CDs” might give you a higher interest rate than you’re getting now.
How to get more information for free
Call my office (02-624-2788) if you want to get ideas on how you can increase investment income.
Douglas Goldstein, CFP®️ is the director of Profile Investment Services, Ltd. www.Profile-Financial.com He is a licensed financial professional both in the U.S. and Israel. Call (02) 624-2788 for a consultation on how to set up your American assets to meet your financial goals. Securities offered through Portfolio Resources Group, Inc. Member FINRA, SIPC, MSRB, FSI. The opinions expressed are those of the author and not those of Portfolio Resources Group, Inc. or its affiliates. Neither PRG nor its affiliates give tax or legal advice.
Published November 5, 2018. Updated July 2021