Increase investment income

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 your investment advisor 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 Service, Ltd., which specializes in helping people who live in Israel with their US dollar assets and American investment and retirement accounts. He helps olim meet their financial goals through asset allocation, financial planning, and using money managers.

Published November 5, 2018.

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