With the economic uncertainty brought on by the pandemic, the Fed has indicated that the current low interest rate environment will last at least through 2023. At these rates, those saving for retirement aren’t receiving much in the yield department right now. Still, there are lower risk strategies that can provide desirable growth while protecting principal.
Dividend Paying Stocks
The dividend yield on the S&P 500 Index is currently around 1.5%. Sure, it’s nothing to get excited about, but this is still significantly more than what U.S. Treasurys are paying. And many dividend-paying stocks are less volatile than the broader market. However, these are still equities and are at risk of a sell-off. Some dividend-paying choices include value stocks, blue chips, and real-estate investment trusts.
One example of “laddering” is a combination of short-term products like CD’s and money markets that provide liquidity along with longer-term assets like fixed indexed annuities that act like a bond alternative and can provide higher rates. Such a strategy can help position your investments to better align with shifting markets. Using CDs and annuities to further diversify and complement existing portfolios can also be a prudent strategy. CDs allow for immediate access to funds in need of an expenditure or emergency funds, whereas annuities serve as the stable alternative to facilitate a longer-term goal at potentially higher interest rates. What’s more, annuities accumulate interest that is tax-deferred.
What Goes Down Must Come Up
Though the pandemic has turned things upside down, you can be sure that interest rates will eventually rise. When they do, those saving for retirement will want to make sure they are properly diversified to take advantage of the current environment while still being properly positioned when rates rise.
The most important first step is to schedule a portfolio review to make sure your portfolio is properly diversified so you can take advantage when opportunities present themselves while still managing risk. You can reach Sylvan Financial Advisors by calling 201-282-5332.
All securities offered through The Investment Center, Inc. Bedminster,NJ- Member FINRA/SIPC. Advisory Services provided through IC Advisory Services, Inc.-An SEC Registered Investment Advisor. Sylvan Financial Advisors is not affiliated with The Investment Center, Inc. or IC Advisory Services, Inc.