Investing for income in your retirement...?
ONE QUESTION I received recently goes to the heart of what people – a lot people but especially older, retired people – are going through, writes Chris Weber in Daily Wealth.
"My wife and I are in our mid 70s. We have about 60% of our funds in gold, silver bullion, some gold and silver stocks, and the balance in cash. We need current cash income from US Dollar with safe dividends – am I dreaming? Can you help?"
In a world of zero interest yields and stock markets paying very low dividend yields, it is now very hard to earn money on your money.
Indeed, guaranteed high yields are almost impossible to get. A while ago, I told my readers about GOV, the real-estate investment trust that rents to government agencies. That was paying 7%. The problem with all stocks, and all REITS, is that stocks can fall by much more than 7%.
So where does that leave a retired couple in their 70s, or anyone who no longer has a job and hopes to live on interest yield as they have in the past? It leaves them in bad shape. Until and unless interest rates on savings rise again, they are going to have to make some very tough choices.
The most direct thing I can recommend is quite obvious: If you can, cut your living expenses. Use whatever advantages you can. For instance, the very fact that you are retired means that you are not tied to a place for a job. You are, theoretically, free to move to a place with a lower cost of living.
In fact, I was just talking to a retired couple who have done just that, not once, but twice over the past two years. As interest rates have fallen, they moved first from one of the highest cost of living areas on the globe back to their home country, the United States. In doing so, they cut their monthly living costs roughly in half.
However, as far as the US goes, this was one of the higher cost of living places. Then, a year later, they moved again, to Florida, where the living costs have become even cheaper. In fact, they said they had cut their cost of living by half again.
Now, for various reasons you may not be able to do likewise. But take stock on what you can do. The central fact that faces many if not most people in this economy is that they have to look at ways to change their lives so that their monthly expenses fall as much as possible, while still being able to afford a decent life.
This particular couple, who had cut their expenses in half and then later cut them in half again, is now well able to live on "accounts receivable." That is to say, on the money that they receive from their retirement programs and any other income, which, though it may be modest, is enough to cover their expenses. In the past, this was not enough without being supplemented by nice, safe interest yields. But those yields are not there anymore.
And the sooner one faces that fact, the better.
The overall thing you have to realize is that the US is quickly becoming a poorer country than it has been since the 1930s. If you are in your mid-70s that means you were born in the early 1930s, so you do not remember the really hard times your parents may have faced. Well, those times are now returning, and may even be worse.
I can't sugarcoat my message. Everyone in this situation has to be prepared to radically change their standard of living. But as Warren Buffett has so rightly said, your standard of living and your quality of life are two different things. You can still live a very rich life while keeping your expenses down.
Of course it is easier for some people than for others. I know an 88-year-old man – my father, in fact – who, despite the fact that he was born with a silver spoon in his mouth, is now, at this time in his life, extremely happy to go to the local library every few days and get large-print books and read them. In his case, he spent his teens, 20s, and 30s living the high life. Now, in his 80s, he is very happy with a simple life.
His cost of living is almost astonishingly low, and yet he has the standard of life that he wants. Nothing bothers him, and he is an extremely happy man. So I suppose it comes down your flexibility, your outlook, and your general personality.
I think the core of everyone's holdings, regardless of what age they are, should be a mixture of cash and gold. In your 70s, you cannot afford to take chances in a stock market that has been extremely volatile. If it came down to a choice of what to convert into cash first, I would say the silver stocks first, then the gold stocks, and then the physical silver. I think silver is dynamite, both in the positive sense when you say "That idea is dynamite," and the negative sense where dynamite can blow up in your face.
In other words, I would get into a position as much as you can of cash and Physical Gold. Then cut your expenses as much as you can, live off the cash, and if necessary, sell a bit of gold.
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