You’re retired, so the risk you’ll tolerate at this point is significantly lower than 20 years ago, right? When retirement came, you shifted your nest egg from equity to the ‘fixed income’ you’ve been programmed to acquire at this point. Thing is, very low risk bonds yield little more than 2-3%. Much more than that and your comfort zone gets pressed a bit. There are plenty out there willing to show you how to get a ‘safe’ 6% bond. Right about then a mental picture of Grandma pops up. She’s reminding you about the warning she gave you so long ago. You know the one — ‘If it sounds too good to be true . . .’
Here’s the million dollar question(s).
If the 10 year Treasury Bond yields 2% or so, how safe and reliable is a corporate bond offering double or triple that yield?
How much is the stability and reliability of your retirement income worth to you?
If something akin to 2008 happens, what will happen to your bond income?
Are you sick ‘n tired of listening to your neighbor down the street bragging about his real estate portfolio’s yield/income?
Are you ready to double to quadruple your bond income by ditchin’ them for far more stable and reliable real estate income?
It’s not been that long ago, when retirees based much of their lifestyle on the double digit yields on their bonds and CDs, back in the early 1980s. When Volker got the interest rates down by crushing inflation, the party was over for retirees. No more makin’ $12,000 a month on their million bucks. The lifestyle? Down in flames.
Incomes slashed virtually overnight. I knew some of these folks in San Diego. One couple, fortunately before they signed the contract, was about to buy a new RV. They saw the writing on the wall, and bailed. Good thing. In less than a year their income plummeted by nearly half. Over time it did end up around half of its peak. They were fine, but the cruises were drastically reduced in number, and there were a lot fewer trips back east to see grandkids.
As soon as you’re able, move your capital from bonds to real estate. A reliable annual cash on cash return will easily be 50-400% higher than what you’re ‘enjoying’ now. Oh, did I forget to mention that much of that annual income will be tax sheltered for over 25 years?
Or how ’bout being able to leave far more to your heirs than you will now, while you’re so heavily into bonds? How ’bout an income that’ll be positively sensitive to inflation? Same with its value.
Tell me again why folks love bonds so much in retirement?