How to Create a GREAT Retirement Plan

Earlier this week, I discussed how using a “3 Bucket” system can ensure a successful retirement. Today, I will explain an alternative approach to managing your financial assets that can be equally effective.

A lifelong friend of mine recently turned 60. Jake does not intend to retire anytime soon, but he also realizes he can’t work forever, either.

Jake’s retirement situation is about as simple as it gets. He is unmarried and his two children are grown and financially independent. Unless he wins the lottery, Jake’s financial situation is unlikely to change much in the years to come.

While in Florida last week my wife and I met up with Jake at his favorite bar to catch up on old times.

However, he was concerned that the coronavirus epidemic might send the stock market into a tailspin and wanted to hear my opinion on the best way to deal with it.

Before doing so, I reminded Jake of an article I shared with him a year ago. In “My 5 Predictions for Investors in 2019”, I opined that the price of gold would rise above $1,500 per ounce. At that time, gold was trading a little below $1,300 per ounce.

If that prediction proved correct, gold would appreciate at least 15% in 2019. To participate in that gain, I recommended buying either the SPDR Gold Shares ETF (GLD) or the Van Eck Vectors Gold Miners ETF (GDX).

I hope my readers took that advice. Over the past 12 months, GLD and GDX are both up more than 20% as coronavirus fears have pushed the price of gold above $1,600 per ounce.

Also read: The Midas Method: Why Gold Shines Now


From Good to GREAT

There are several ways to generate income in retirement, many of which would be good for most investors. For example, the Personal Finance Income Portfolio consists of equity securities that pay an average annual dividend yield of 5.6%.

That level of income should grow over time as those companies increase their annual dividend payments. However, a stock market crash could send their share prices reeling until the economy gets back on its feet.

For that reason, some investors may feel comfortable in a “GREAT” portfolio consisting of Gold, Real Estate And Treasuries. Although the annual income may be a bit lower, this type of portfolio should hold up considerably better if the stock market hits the skids:

  • Gold is universally recognized as a hedge against global uncertainty. When geopolitical tensions mount or a virus epidemic threatens to destabilize the world’s economy, gold escalates in value.
  • Real estate is a reliable source of income that tends to appreciate with inflation. In particular, owning property via a real estate investment trust (REIT) is an efficient means of earning rental income that should escalate over time.
  • U.S. Treasury securities are regarded as the safest investment in the world. For that reason, their yields are low but they provide security when the stock market is under attack.

You can create a GREAT retirement income plan by combining these three asset classes in a single portfolio. A standard allocation of 40% REITs, 40% Treasuries and 20% gold provides a reasonable level of income while guarding against a stock market crash.

A Happy Ending in Retirement

So how do you put this theory into practice? For many self-directed investors, the most practical way to do that is to use a combination of exchange-traded funds (ETFs) and REITs. That way, you get maximum portfolio diversification at minimum cost, along with professional management of the assets.

For example, the Office Properties Income Trust (NYSE: OPI), which receives more than half of its rental income from state and federal government agencies, pays an annual dividend yield of 7.2%. The SPDR DB International Government Inflation-Protected Bond ETF (WIP) currently pays 2.5%. Combined with GLD which pays no dividend, the weighted average yield for this portfolio would be 3.3%.

Source: Investing Daily

A 3.3% yield may not sound exciting, but that is three times the 1.1% yield on the 10-year Treasury note and nearly double the 1.7% yield on the SPDR S&P 500 ETF Trust (SPY). However, if the stock market crashes, the SPY would go down the tubes with it.

As for my friend Jake, all he wants is a happy ending to what thus far has been a wonderful life. He is not greedy and only wants to maintain his current standard of living. What he does not want is to have a lifetime’s worth of work swept away by events beyond his control.

I suspect many people share Jake’s feelings these days. The stock market has created tremendous wealth over the past 10 years but appears to be on the verge of unraveling. For many of them, a GREAT investment plan may be the ticket to a stress-free retirement.

Editor’s Note: To further reduce stress in today’s uncertain investment climate, you need to add hedges to your portfolio. As Jim Pearce just explained, a classic “crisis hedge” is gold, which typically rises in price during the sort of risky conditions we’re currently witnessing.

Our colleague Dr. Stephen Leeb has pinpointed an under-the-radar gold miner that shines above the rest. This small-cap “rocket stock” is poised to blast off, but most of Wall Street hasn’t even noticed the company.

Dr. Leeb is chief investment strategist of the premium trading service, The Complete Investor. The time to invest in his gold mining play is now, before the rest of the investment herd catches on.

Regardless of your retirement goals, every portfolio deserves to hold some gold. To learn more about Dr. Leeb’s golden opportunity, access our special report.