If you're determined to buy gold coins, don't pay more than 5% to 8% or so over the spot price, which you can find at www.gold.org.
Hi WayneDC. Absolutely. One solid dividend-focused fund is Vanguard Dividend Growth (VDIGX). The fees are low, about 0.31%.
And of course, VDIGX is one of the funds recommended in that article
Also, don't forget foreign dividend growers. One is PowerShares International Dividend Achievers ETF. It invests in foreign companies that have raised dividends for at least five consecutive years.
Alright, here's our next question from LeighWC
Hi LeighWC. REITs can make sense as part of a retiree's long-term asset allocation, but they've been on a big run and many analysts feel their valuations have become a bit rich lately. If you're interested in adding them to your portfolio, consider dollar-cost-averaging into a broadly diversified REIT fund.
Smart suggestion. Thanks, Eleanor.
Definitely, VNQ is a solid choice with very low expenses. You might also take a look at iShares Dow Jones Real Estate Index (IYR).
LeighWC, make sure you steer clear of non-traded REITS. They are not traded on an exchange. They're very illiquid and you may have a tough time getting your money out. They're publicizing heavily, so be careful.
Alright, let's take our next question from dwfboca.
Hi D. Fleming. Dividend paying stocks may be a good choice if you have at least a five year time horizon. Don't just go for the highest yields you can find. Generally you may find better valuations (and less risk of a dividend cut) with stocks yielding a more moderate 4% or less.
That's a good point, Eleanor.
The first thing that would concern me is getting out of an annuity. You would need to find out if there are any surrender or other charges before you move out. You can find safe dividend payers with higher yields, but steer clear of stocks with 8% or 9% yields. They can be big trouble. As Eleanor says, a moderate 4% or less would be a way to go.
D. Fleming, if you have a few years before you need this money, you might also take a look at closed-end bond funds, which often offer attractive distributions. Just don't buy these funds at a steep premium to NAV. Alliance Bernstein Income fund (ACG), for example, is trading at a discount to NAV and has a distribution rate of about 5.6% relative to its share price.
Alright, we only have ten minutes left, so let's move on to our next question from Janet. Dividends are a hot topic today!
A really high dividend yield on a stock (say, 8% or 10%) may be a signal that the market thinks the dividend is going to get cut. Of course, a mutual fund generally offers broad diversification that cushions the blow if a single stock tanks. Just be sure you understand how the fund is generating that attractive yield.
For dividend paying stocks, we often recommend looking for ones that consistently increase their dividends over a number of years.
Also, if a dividend paying stock is offering a very high dividend and the company heads into bad times, it can cut or eliminate the dividend. You want reliability from a dividend payer.
Alright, unfortunately it looks like we only have time for one or two more questions. Here's one from Robert.
And if one of you wants to tackle this question from Linda, that'd be great.
Just a note, during the course of this live chat, the Fed has announced another round of bond-buying. Just another factor likely to keep rates low!
Robert, you likely wouldn't want to convert the entire amount to a Roth at one time -- you could push yourself into a higher tax bracket than necessary. But a smart strategy is to do partial conversions over a number of years. You could convert an amount that takes you to the top of your current tax bracket each year, for example.
Wow. Thanks for pointing that out, Eleanor!
Having a stream of tax-free income from a Roth is valuable in retirement, and will give you flexibility in the future.
Linda, that depends on your goals and how much you have to invest. Depending on your savings, you may be able to build a CD ladder to deliver highly reliable income. Another option would be "managed payout funds," designed to deliver steady income, such as Vanguard Managed Payout Distribution Focus. These involve some risk, and the distribution level can go up or down.
Linda, since you're only 50 years old, you should also keep in mind that you may need a healthy allocation to stocks in your portfolio to provide some growth and keep up with inflation over time.
Thanks, Eleanor. Time horizon is certainly an important factor here.
It's really important as well to diversify across many asset classes--U.S. stocks, international stocks, perhaps some commodities and so forth.
Absolutely, thanks Susan.
Exactly, diversification is key, since many retirees are taking on a bit more risk in order to find decent yields.
Alright, unfortunately it's time to wrap up today's chat.
Thank you all for joining us today. We appreciate your wonderful questions.
And last but not least, we’ll be hosting a live Q&A with NAPFA financial planners next Thurs., Sept. 20, from 1pm-3pm. We hope you’ll join us again.
Enjoy the rest of your afternoon!