The traditional approaches to retirement planning are longer covering all expenses in nest egg years. So what can retirees do? Thankfully, there are alternative investments that provide steady, higher-rate income streams to replace dwindling bond yields. Bluerock Total Income+ Real Estate Fund Announces 31st Consecutive Quarterly Distribution at a 5.25% Annualized Rate Image: REDPIXEL.PL (Shutterstock) As commission-free brokerages and stock trading apps—like the popular Robinhood platform—continue to grow, millions of new stock traders may not be prepared for next year’s taxes. When you’re new to trading… Finance Minister Wopke Hoekstra said the Netherlands is well positioned to ride out the coronavirus pandemic as he presented his final budget before next year’s election.
Strange but true: seniors fear death less than running out of money in retirement.
And retirees have good reason to be worried about making their assets last. People are living longer, so that money has to cover a longer period. Making matters worse, income generated using tried – and – true retirement planning approaches may not cover expenses these days. That means seniors must dip into principal to meet living expenses.
The tried – and – true retirement investing approach of yesterday doesn’t work today.
For many years, bonds or other fixed-income assets could produce the yield needed to provide solid income for retirement needs. However, these yields have dwindled over time: 10-year Treasury bond rates in the late 1990s were around 6.50%, but today, that rate is a thing of the past, with a slim likelihood of rates making a comeback in the foreseeable future.
The impact of this rate decline is sizeable: over 20 years, the difference in yield for a $1 million investment in 10-year Treasuries is more than $1 million.
In addition to the considerable drop in bond yields, today’s retirees are nervous about their future Social Security benefits. Because of certain demographic factors, it’s been estimated that the funds that pay the Social Security benefits will run out of money in 2035.
How can you avoid dipping into your principal when the investments you counted on in retirement aren’t producing income? You can only cut your expenses so far, and the only other option is to find a different investment vehicle to generate income.
Invest in Dividend Stocks
Dividend-paying stocks from low-risk, high-quality companies are a smart way to generate steady and reliable attractive income streams to replace current low risk, low yielding Treasury and bond options.
For example, AT&T and Coca-Cola are income stocks with attractive dividend yields of 3% or better. Look for stocks like this that have paid steady, increasing dividends for years (or decades), and have not cut their dividends even during recessions.
One way to identify suitable candidates is to look for stocks with an average dividend yield of 3%, and positive average annual dividend growth. Many stocks increase dividends over time, helping to offset the effects of inflation.
Here are three dividend-paying stocks retirees should consider for their nest egg portfolio.
AbbVie (ABBV – Free Report) is currently shelling out a dividend of $1.18 per share, with a dividend yield of 5.26%. This compares to the Large Cap Pharmaceuticals industry’s yield of 2.33% and the S&P 500’s yield of 1.65%. In terms of dividend growth, the company’s current annualized dividend of $4.72 is up 10.28% from last year.
Atlas (ATCO – Free Report) is paying out a dividend of 0.13 per share at the moment, with a dividend yield of 5.36% compared to the Financial – Investment Management industry’s yield of 1.62% and the S&P 500’s yield. Taking a look at the company’s dividend growth, its current annualized dividend of $0.5 is flat compared to last year.
Currently paying a dividend of 0.5 per share, CVS Health (CVS – Free Report) has a dividend yield of 3.48%. This is compared to the Retail – Pharmacies and Drug Stores industry’s yield of 0% and the S&P 500’s current yield. Looking at dividend growth, the company’s current annualized dividend of $2 is flat compared to last year.
But aren’t stocks generally more risky than bonds?
Yes, that’s true. As a broad category, bonds carry less risk than stocks. However, the stocks we are talking about – dividend -paying stocks from high-quality companies – can generate income over time and also mitigate the overall volatility of your portfolio compared to the stock market as a whole.
A silver lining to owning dividend stocks for your retirement portfolio is that many companies, especially blue chip stocks, increase their dividends over time, helping offset the effects of inflation on your potential retirement income.
Thinking about dividend-focused mutual funds or ETFs? Watch out for fees.
If you’re interested in investing in dividends, but are thinking about mutual funds or ETFs rather than stocks, beware of fees. Mutual funds and specialized ETFs may carry high fees, which could lower the overall gains you earn from dividends, undercutting your dividend income strategy. Be sure to look for funds with low fees if you decide on this approach.
Seeking steady, consistent income through dividends can be a smart option for financial security in retirement, whether you invest in mutual funds, ETFs, or in dividend-paying stocks.
Generating income is just one aspect of planning for a comfortable retirement.
To learn more ways to maximize your assets – and avoid pitfalls that could jeopardize your financial security – download our free report:
Will You Retire a Multi-Millionaire? 7 Things You Can Do Now
Author: Zacks Investment Research
Bluerock Total Income+ Real Estate Fund Announces 31st Consecutive Quarterly Distribution at a 5.25% Annualized Rate
NEW YORK, Sept. 14, 2020 /PRNewswire/ — Bluerock Total Income+ Real Estate Fund (“TI+,” tickers: TIPRX, TIPPX, TIPWX, TIPLX) has paid a third quarter distribution of $0.3847 per share, or 1.31% for the quarter, based on the share price of $29.31 (A-shares) for shareholders of record as of September 11, 2020. This distribution amount represents an annualized rate of 5.25%* based on the current share price, marking the Fund’s 31st consecutive quarterly distribution. Since inception in 2012, TIPRX has paid $11.40 of distributions to its shareholders. In addition to these quarterly distributions, TIPRX NAV has grown over 17% from $25 to $29.31 per share (as of 9.11.2020).
“TI+ continues to pay a 5.25% annual distribution rate, demonstrating the durability of the income from the underlying portfolio, when many other companies including selected listed REITs have cut dividends. TI+ has accomplished this with a low maximum drawdown of 2.38% which compares very favorably to the S&P 500 and leading listed REIT index which experienced maximum drawdowns of 33.79% and 44.03%, respectively in 2020, which is critical for income investors who want to retain their principal,” said Jeffrey Schwaber, CEO of Bluerock Capital Markets.
Since inception, TI+ has delivered on its stated objectives, including current income and capital appreciation as well as low correlation and low volatility relative to the broader markets. Since inception, TI+ has generated higher risk-adjusted returns than major stock, bond and public REIT indexes1, while providing investors access to institutional, private equity real estate previously unavailable to individual investors.
Net assets under management for TI+ are approximately $2.34 billion as of September 11, 2020. TI+ currently maintains positions in 23 private equity and 2 private debt real estate investments, with underlying assets valued at approximately $217 billion (holdings are subject to change at any time and should not be considered investment advice).2
1 Indexes with respective Standard Deviations and Sharpe Ratios (inception through 6/30/2020): Stocks: S&P 500, 20.54%, 0.87; Bonds: Bloomberg Barclays U.S. Aggregate Bond Index, 4.10%, 0.90; REITs: MSCI U.S. REIT Index, 24.58%, 0.31; TI+ Fund: 1.74%, 5.51. TI+ Correlations (inception through 6/30/2020): Stocks: S&P 500, 0.32; Bonds: Bloomberg Barclays U.S. Aggregate Bond Index, 0.09; MSCI U.S. REIT Index, 0.44. There are limitations when comparing across various asset classes. Equities, fixed income, and real estate securities have significantly different risk and liquidity factors.
2 For detailed Fund holdings, please visit http://bluerockfunds.com/investment-holdings/
TI+ A Share Fund Net Performance
Performance through 6.30.2020
TI+ Fund Class A
Returns presented are total net return: Expressed in percentage terms, the calculation of total return is determined by taking the change in price, reinvesting, if applicable, all income and capital gains distributions during the period, and dividing by the starting price. Returns greater than one year are annualized.
The performance data quoted here represents past performance. Current performance may be lower or higher than the performance data quoted above. Investment return and principal value will fluctuate, so that shares, when redeemed, may be worth more or less than their original cost. For performance information current to the most recent month end, please call toll-free 1-888-459-1059. Past performance is no guarantee of future results.
The total annual fund operating expense ratio, gross of any fee waivers or expense reimbursements, is 2.21% for Class A, 2.96% for Class C, 1.96% for Class I, and 2.45% for Class L. The Fund’s investment advisor has contractually agreed to reduce its fees and/or absorb expenses of the fund, at least until January 31, 2021 for Class A, C, I and L shares, to ensure that the net annual fund operating expenses will not exceed 1.95% for Class A, 2.70% for Class C and 1.70% for Class I, and 2.20% for Class L, per annum of the Fund’s average daily net assets attributable to Class A, Class C, Class I, and Class L shares, respectively, subject to possible recoupment from the Fund in future years. Please review the Fund’s Prospectus for more detail on the expense waiver. A fund’s performance, especially for very short periods of time, should not be the sole factor in making your investment decisions. Fund performance and distributions are presented net of fees.
The Bluerock Total Income+ Real Estate Fund is a closed-end interval fund that invests the majority of its assets in institutional private equity real estate securities that are generally available only to institutional investors capable of meeting the multi-million dollar minimum investment criteria. As of Q2 2020, the value of the underlying real estate held by the securities in which the Fund is invested is approximately $217 billion, including investments managed by Ares, Blackstone, Morgan Stanley, Principal, Prudential, Clarion Partners, Invesco and RREEF, among others. The minimum investment in the Fund is $2,500 ($1,000 for retirement plans) for Class A, C, and L shares.
For copies of TI+ public company filings, please visit the U.S. Securities and Exchange Commission’s website at www.sec.gov or the Company’s website at www.bluerockfunds.com.
Investing in the Bluerock Total Income+ Real Estate Fund involves risks, including the loss of principal. The Fund intends to make investments in multiple real estate securities that may subject the Fund to additional fees and expenses, including management and performance fees, which could negatively affect returns and could expose the Fund to additional risk, including lack of control, as further described in the prospectus.
*The Fund’s distribution policy is to make quarterly distributions to shareholders. The level of quarterly distributions (including any return of capital) is not fixed and this distribution policy is subject to change. Shareholders should not assume that the source of a distribution from the Fund is net profit. A portion of the distributions consist of a return of capital based on the character of the distributions received from the underlying holdings, primarily Real Estate Investment Trusts. The final determination of the source and tax characteristics of all distributions will be made after the end of each year. Shareholders should note that return of capital will reduce the tax basis of their shares and potentially increase the taxable gain, if any, upon disposition of their shares. There is no assurance that the Company will continue to declare distributions or that they will continue at these rates. There can be no assurance that any investment will be effective in achieving the Fund’s investment objectives, delivering positive returns or avoiding losses.
Limited liquidity is provided to shareholders only through the Fund’s quarterly repurchase offers for no less than 5% of the Fund’s shares outstanding at net asset value. There is no guarantee that shareholders will be able to sell all of the shares they desire in a quarterly repurchase offer. Quarterly repurchases by the Fund of its shares typically will be funded from available cash or sales of portfolio securities. The sale of securities to fund repurchases could reduce the market price of those securities, which in turn would reduce the Fund’s net asset value.
Investors should carefully consider the investment objectives, risks, charges and expenses of the Bluerock Total Income+ Real Estate Fund. This and other important information about the Fund is contained in the prospectus, which can be obtained online at bluerockfunds.com. The Bluerock Total Income+ Real Estate Fund is distributed by ALPS, Inc. The prospectus should be read carefully before investing. Bluerock Fund Advisor, LLC is not affiliated with ALPS, Inc.
S&P 500: An index of 500 stocks chosen for market size, liquidity and industry grouping, among other factors. The S&P 500 is designed to be a leading indicator of U.S. equities and is meant to reflect the risk/return characteristics of the large cap universe (Investopedia). Risks include the dynamic fluctuations of the market and possible loss of principal.
MSCI US REIT Index (Public REITs): A free float-adjusted market capitalization weighted index comprised of equity REITs that are included in the MSCI US Investable Market 2500 Index, with the exception of specialty equity REITs that do not generate a majority of their revenue and income from real estate rental and leasing operations. The index represents approximately 85% of the US REIT universe (www.msci.com). Returns shown are for informational purposes and do not reflect those of the Fund. You cannot invest directly in an index and unmanaged indices do not reflect fees, expenses or sales charges. Risks include rising interest rates or other economic factors that may negatively affect the value of the underlying real estate.
The Bloomberg Barclays U.S. Aggregate Bond Index: measures the performance of the U.S. investment grade bond market. The index invests in a wide spectrum of public, investment-grade, taxable, fixed income securities in the United States – including government, corporate, and international dollar-denominated bonds, as well as mortgage-backed and asset-backed securities, all with maturities of more than 1 year. Risks include rising interest rates, credit quality of the issuers and general economic conditions.
Sharpe Ratio: Measurement of the risk-adjusted performance. The annualized Sharpe ratio is calculated by subtracting the annualized risk-free rate – (3-month Treasury Bill) – from the annualized rate of return for a portfolio and dividing the result by the annualized standard deviation of the portfolio returns. You cannot invest directly in an index. Benchmark performance should not be considered reflective of Fund performance.
Correlation: the degree to which two securities move in relation to each other. Correlation is measured as a correlation coefficient, with a value falling between -1 and 1. 0 = No Correlation | 1 = Perfectly Positively Correlated | -1 = Perfectly Negatively Correlated
Maximum Drawdown: The maximum decline a security experiences prior to reaching its previous peak.
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SOURCE Bluerock Total Income+ Real Estate Fund
Tax Tips Every First-Time Stock Trader Should Know
As commission-free brokerages and stock trading apps—like the popular Robinhood platform—continue to grow, millions of new stock traders may not be prepared for next year’s taxes.
When you’re new to trading stocks, you may not consider how your account may impact your taxes. For example, Robinhood only offers a taxable brokerage account—which is different from your tax-deferred 401(k). Here’s why: Every time you sell a stock, it may impact your taxes right away.
If you have already been buying and selling stocks through a trading app—or multiple apps—while stuck at home this year, here are some important tax tips to know.
You may earn investment income when you sell a stock for a profit—or when you receive a dividend—and it is taxed differently from your salary at work. The difference is you may owe taxes at capital gains rates, based on how long you own the stock.
When you own a stock for a year or more and you sell it for a profit, you will owe long-term capital gains taxes, which typically aren’t more than 15%. This may be cheaper than your regular income taxes, depending on your tax bracket.
But if you own a stock for less than one year and sell it for a profit—which may be common for stock traders—you may owe short-term capital gains taxes. These rates are the same as your regular income taxes—aka “ordinary income” rates.
Because our taxes are a pay-as-you-earn system, you may also owe quarterly estimated taxes throughout the year as you earn a profit selling stocks. You may use this worksheet to calculate what you owe—or you may seek guidance from a tax professional.
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As the end of the year approaches, it may be possible to offset some of your capital gains with other stocks that have lost money—known as capital losses. These losses have the same timelines, or “holding periods,” as short-term and long-term capital gains—but you must “realize” these gains or losses by selling those stocks before the end of the year.
You may learn more about the net capital gain or loss tax rules here—but you should work with a tax professional if you’re feeling unsure.
If your capital losses exceed your capital gains, you may deduct up to $3,000 (or $1,500 if married filing separately) of your capital losses from your regular income. You can see more details about how to deduct capital losses on Schedule D.
September 15, 2020
Fixed Income Tidbits
Drew O’Neil discusses fixed income market conditions and offers insight for bond investors.
To learn more about the risks and rewards of investing in fixed income, please access the Securities Industry and Financial Markets Association’s “Learn More” section of investinginbonds.com, FINRA’s “Smart Bond Investing” section of finra.org, and the Municipal Securities Rulemaking Board’s (MSRB) Electronic Municipal Market Access System (EMMA) “Education Center” section of emma.msrb.org.
The author of this material is a Trader in the Fixed Income Department of Raymond James & Associates (RJA), and is not an Analyst. Any opinions expressed may differ from opinions expressed by other departments of RJA, including our Equity Research Department, and are subject to change without notice. The data and information contained herein was obtained from sources considered to be reliable, but RJA does not guarantee its accuracy and/or completeness. Neither the information nor any opinions expressed constitute a solicitation for the purchase or sale of any security referred to herein. This material may include analysis of sectors, securities and/or derivatives that RJA may have positions, long or short, held proprietarily. RJA or its affiliates may execute transactions which may not be consistent with the report’s conclusions. RJA may also have performed investment banking services for the issuers of such securities. Investors should discuss the risks inherent in bonds with their Raymond James Financial Advisor. Risks include, but are not limited to, changes in interest rates, liquidity, credit quality, volatility, and duration. Past performance is no assurance of future results.
Hoekstra Says Dutch Finances Are Holding Up Amid Covid Crisis
Finance Minister Wopke Hoekstra said the Netherlands is well positioned to ride out the coronavirus pandemic as he presented his final budget before next year’s election.
Hoekstra introduced a new tax on CO2 emissions and raised levies on property investors as he forecast an economic contraction of 5% this year and a budget deficit of 7.2% of GDP. The economy will rebound with a 3.5% expansion in 2021, narrowing the deficit to 5.5%, Hoekstra said.
“It is the biggest economic downturn since World War II, so you can hardly call this an optimistic day,” Hoekstra said as he handed over his plans to parliament in The Hague on Tuesday. “But with that in mind the numbers are quite positive.”
Prime Minister Mark Rutte is looking to appeal to middle class voters ahead of an election due in March next year and he delayed for a second year a plan to cut the main tax rate for companies from 25%. He is also toughening his traditionally friendly approach to big business amid signs that Dutch lawmakers are growing uncomfortable with the amount of support handed out to large companies during the pandemic.
“Austerity is not needed,” Rutte said earlier this month in an online chat with voters. “We have an apple stored away for when we need it.”
Before the budget, the government had already announced a third 11 billion-euro ($13 billion) package of subsidies for companies hit by the coronavirus lockdown, bringing the total to 48 billion euros so far. Hoekstra also set out details last week of a 20 billion-euro investment fund that aims to help modernize the Dutch economy over the next five years.
— With assistance by Ruben Munsterman, and Joost Akkermans