Latest news with #financialfreedom
Forbes
6 hours ago
- Business
- Forbes
3 Big Dividends That Could Ease Worries And Lead To Financial Freedom
Happy mature woman walking embraced with her friends in nature. Few things ease financial worry like knowing you can walk away from work anytime you want, having true financial freedom. Closed-end funds (CEFs) give us just that kind of security—and we talk about that a lot in my weekly articles and in my CEF Insider service. With yields of 8%, 9% and more, CEFs generate huge payouts that could let you retire earlier than you think. It's such a powerful—and overlooked—way to invest that it's worth revisiting again today. We'll color our discussion by looking at how some typical American retirees could retire with CEFs. And we're going to work in some real-life numbers, too. I can't stress enough that we're not doing anything exotic to grab these yields: One of these three CEFs invests in S&P 500 stocks. The others are almost as familiar, holding corporate bonds and publicly traded real estate investment trusts (REITs). More on these funds in a moment. First, let's look at some real figures to see how much income investors could potentially book from CEFs. First, let's get some data about the net worth of the average retiree. Fortunately, the Federal Reserve regularly collects this information. The numbers say something startling: The average retiree is doing well, with the 65-to-74-year-old cohort sporting an average net worth of $1.79 million in 2022, with some of that being in their primary residence. Since that was a lousy year for markets, that net worth is probably higher now. Of course, not everyone is doing well. Because many haven't been able to save as much as the top tier, the median retiree has a net worth of about $409,900. This means they need to rely on Social Security. However, even a less-wealthy retiree could have a comfortable retirement with the three funds I'm about to show you—and we'll get to those in just a moment. But first, let's talk about our average retiree, with that $1.79-million net worth. They probably have at least some of their wealth in S&P 500 index funds, which yield around 1.3%. That translates into $2,000 in monthly income if they had the full $1.79 million available to invest (an assumption we'll make as we move through this article). They could get much more through the three funds we'll discuss next—all of which will be familiar to CEF Insider readers. The Adams Diversified Equity Fund (ADX) yields 8.8% and holds well-known stocks like Apple (AAPL), Microsoft (MSFT) and Visa (V). It's also one of the world's oldest funds, having launched in 1929, days before that year's market crash. Moreover, ADX has a history of strong returns: It has crushed the S&P 500 for decades, including our holding period at CEF Insider, which began nearly eight years ago, on July 28, 2017. ADX Outperforms Despite that outperformance, ADX has a 7.5% discount to NAV that has been closing since the middle of 2024 but still remains quite wide. One other thing to bear in mind: ADX commits to paying 8% of NAV out per year as dividends, paid quarterly, so the payout does float as its portfolio value fluctuates. Next is the Nuveen Core Plus Impact Fund (NPCT), a 12.2%-yielding corporate-bond fund. Its discount has been shrinking in the last few years, from over 15% to around 4.1% today. Again, the portfolio shows why: NPCT's managers have picked up bonds from low-risk issuers, including utilities like Brooklyn Union Gas and financial institutions like Standard Chartered and PNC Financial Services Group. More importantly, they've taken advantage of higher interest rates to lock in high-yielding bonds with long durations, with an average leverage-adjusted duration of 8.4 years. (This measure takes the effect of the fund's borrowing into account, making it a more accurate description of rate sensitivity.) That stands to pay off when rates decline, cutting yields on newly issued bonds and boosting the value of already-issued, higher-yielding bonds like the ones NPCT owns. Let's wrap with the 12.3%-yielding Nuveen Real Asset Income and Growth Fund (JRI). Its portfolio features powerhouse REITs like shopping-mall landlord Simon Property Group (SPG) and Omega Healthcare Investors (OHI), which profits from the aging population by financing assisted-living and skilled-nursing facilities. That huge dividend has a history of growth, too: JRI Dividend The fund has seen its discount shrink to 3.1% from the 15% level it was at in mid-2023, even after the pandemic hit REITs hard, and that discount continues to have upward momentum. Put those three CEFs together and you have a 'mini-portfolio' yielding 11.1% on average. Here's how that income stream looks with $1.79 million invested. Income Potential As you can see, with these CEFs, the average retiree's net worth could fetch around $200,000 in annual income, or $16,630 per month. What about the median, though? Well, their $409,900 would bring in a nice income stream, too. Income Potential Now we've got $3,798 per month, a smidge higher than the median income for US workers (which is $3,518 per month, again per the Federal Reserve). Add the median $2,000 per month in Social Security benefits, and that turns into nearly $6,000 a month. Michael Foster is the Lead Research Analyst for Contrarian Outlook. For more great income ideas, click here for our latest report 'Indestructible Income: 5 Bargain Funds with Steady 10% Dividends.' Disclosure: none
Yahoo
19 hours ago
- Business
- Yahoo
Tradie reveals trick to buying home and saving $120,000: 'I can retire now'
A tradie has revealed his secret to buying a property, working fewer hours and having $120,000 in savings. The man said he could retire now if he wanted to, but chose to keep working because he enjoyed the 'hustle'. The 30-year-old was stopped in the street by Coposit, a property app that has gone viral online for asking people to candidly reveal how much money they have in the bank. The man shared he worked as a machine operator for a steel company, had $120,000 in savings, had a property and was saving for another one. It's an impressive feat given the average age for first-time buyers in Australia is around 36 years old and the average savings for a 30 to 34-year-old is $21,394. RELATED Gen Z Aussie saves $4,000 in four months with new money trend available to millions Centrelink age pension changes coming into effect from July 1 Centrelink rule change gives more Aussies access to $5,000 cash boost When asked to share his best piece of advice for others, the man revealed it was all about striking a balance. 'It's like eating ramen noodles or rice for the whole week and then eating steak and lobster on the weekend, sort of thing. As you progress, you sort of change that,' he said. The man said he was able to 'eat steak on the weekend' and enjoy a trip to 'luscious Sydney' because he put in the hard yards during the week. 'During the week, I'm greased up, tradie uniform covered in oil. It's dirty work, but that's where the money is,' he said. The man said he was reducing the number of days he was working so he had more time 'living life' and less time working. 'So I can retire now because the house is paying for itself, but because I want more, I'm working still and saving, and because I enjoy the hustle,' he said. 'My end goal is before I retire, I want to have three houses so that when I sell those three houses, I can live in one, the other can fund my sports car, and the other one can be a boat or a holiday.' He said he could 'realistically' afford an R8 or Lotus right now based on his current position, but he thought buying a home was more important. 'It's just perspective,' he said. The video has racked up thousands of views online, with many praising the man for his hustle. 'What discipline!' one said. 'Delayed gratification in conclusion,' another said. 'Salute to this man,' another in retrieving data Sign in to access your portfolio Error in retrieving data
Yahoo
a day ago
- Business
- Yahoo
Doctors turned real estate investors share the strategy they used to 'zero out' income taxes for 7 years
Letizia Alto and Kenji Asakura started investing in real estate in 2015 to hit financial freedom. The physician couple leveraged Real Estate Professional Status to offset their clinical income. There are specific REPS qualifications, such as spending 750+ hours a year on real-estate activities. Letizia Alto and Kenji Asakura started buying real estate to supplement, and eventually fully replace, their incomes as doctors. They wanted to reduce their hospital shifts so they could spend more time together and with their kids. Since buying their first investment property in 2015, they've expanded to more than 100 units that bring in six-figure rental cash flow. They both scaled back in the hospital and consider themselves "semi-retired," as they still work on their real estate portfolio and financial literary company, Semi-Retired MD. Over the last decade of investing, the couple has learned that "there are six ways you make money in real estate," Alto told Business Insider, one of which is often overlooked: the tax benefits. "The tax code is essentially a series of incentives to encourage certain behavior that the government wants," said Asakura. They've spent years understanding how to use it to their advantage and, thanks to one strategy in particular, said they managed to "zero out" their income taxes for seven years. The couple's main real estate-specific tax strategy is one that allows qualifying individuals to shelter their income using an IRS designation known as "real estate professional status," or REPS. Typically, rental real estate losses are considered passive and can only offset passive income. For example, if you're working as an accountant and invest in real estate on the side, then the losses from your real estate business offset your rental income, but you can't take that loss and offset your accountant income. That's because they're two unrelated activities. However, if you're considered a real estate professional, it all becomes one big activity, and you can fully deduct rental losses against active forms of income, including W2 and 1099 earnings. In Alto and Asakura's case, they've used the status to offset their physician incomes. The couple provides an example on their blog: Say you earn $250,000 as a doctor, and you and your spouse run a real estate business that generates $150,000 in losses. If neither of you qualifies for REPS, you're taxed on all $250,000. However, if one spouse claims REPS, you can deduct $150,000 from your $250,0000 income, meaning you'll only be taxed on $100,000, which can result in a significant difference in tax liability. Note that you must generate a loss to get the tax benefit. It's fairly common in real estate to generate positive cash flow while showing a loss on your tax returns, they explained. That's because of deductions like depreciation — the IRS assumes buildings wear out over time and allows you to deduct a portion of your property's value each year as an expense — and expenses like renovations. In 2015, the first year Asakura qualified for REPS, "we did a lot of rehabbing to create our losses," explained Alto. "When we rehabbed, we would be increasing the value of the property and increasing cash flow of the property, but the rehab was a write-off, which was insane. I hope people understand that rehabbing is such an incredible thing to do because it is tax beneficial, but you get to keep all the upside of it." To qualify, real estate has to be your primary job. Being a real-estate agent automatically deems you a professional, but if you don't have that license, you may qualify if you meet certain requirements. The two main stipulations are: 1. You must spend more than 750 hours a year on real-estate activities. 2. More than half your working hours must be in real estate. Asakura transitioned to a part-time hospitalist in 2015 so he could qualify for the status. Only one spouse needs to qualify, meaning Alto could continue working and deduct the real estate losses from her clinical income. CPA Kristel Espinosa told BI that REPS is often abused and emphasized the importance of documenting everything, from how you spend your working hours to the mileage you drove to visit properties. "You can have other jobs, but you just have to be able to show that to the IRS if ever audited that the real-estate business really is your main thing," she said. If you meet the requirements, "Then, of course, designate yourself as a real-estate professional. It obviously has huge benefits. But then also be aware that this is a highly scrutinized area by the IRS, too, so that's why you want to have your documentation in place." Asakura keeps track of his hours in a Google calendar and includes detailed notes. If you spend a substantial amount of time on your portfolio, REPS is worth looking into — and don't assume your CPA knows about the status. "We'll run into people who have large real estate portfolios and they've never claimed it," said Alto. "They have all these losses that are just sitting there as passive losses because their CPA didn't know they were active, and they could have saved so much in taxes." Read the original article on Business Insider Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
a day ago
- Business
- Yahoo
Robert Kiyosaki Says Don't ‘Work for Money' — Do This Instead
Most of us work for the explicit purpose of making money, but 'Rich Dad Poor Dad' author Robert Kiyosaki said that this is not what we should be looking to get out of work. Learn More: Read Next: 'When you work just for money, you become a slave to your job — stuck in the rat race, living paycheck to paycheck,' he wrote on Instagram. Here's why he believes working for money is a mistake, and what you should be doing instead. Kiyosaki believes that many of us approach our jobs with the wrong motivation, and that this behavior is stopping us from building wealth. 'Are you working for money? Or working to learn?' he wrote on Instagram. 'Most people chase paychecks, but the rich chase knowledge.' Working for money keeps you trapped in a paycheck-to-paycheck cycle, Kiyosaki said. 'But when you work to gain skills, connections and experience, you build the foundation for true wealth,' he wrote. Find Out: If you want to achieve financial freedom, focus on what you can learn at your job rather than on how much you are getting paid, Kiyosaki said. 'The rich don't work for money,' he wrote. 'They make money work for them. Stop trading time for dollars. Start working for knowledge. That's the real path to financial freedom.' Kiyosaki isn't the only financial expert who believes the real value of a job is how much you can learn from it. In a post on Bluesky, serial entrepreneur Mark Cuban shared his career advice for new college grads looking for their first jobs out of school, and it echoed a lot of Kiyosaki's sentiments. 'I tell every kid that asks that you paid money to learn. Now it's time to get paid to learn,' he shared. 'You don't need a perfect job. You need to be the best as you can at your job. People like jobs they are good at, but you are always a free agent. You can always be looking and learn more in a new job.' More From GOBankingRates How Far $750K Plus Social Security Goes in Retirement in Every US Region This article originally appeared on Robert Kiyosaki Says Don't 'Work for Money' — Do This Instead
The Independent
a day ago
- Business
- The Independent
Revealed: The exact amount every generation needs to save for a comfortable retirement
The surprising amount a person needs to save in each decade of their life for a ' comfortable retirement ' has been revealed. Someone aged in their 20stoday needs to start saving nearly £500 a month, research from investment management company Fidelity shows, with this figure rising significantly every ten years. Assuming a starting point of no savings, a 35-year old should start putting away £841 a month, the research shows. This rises to £1,703 at 45 and £4,508 at 55. These are the amounts that would be needed to hit a 'comfortable' retirement salary which the Pensions and Lifetime Savings Association (PLSA) puts at £43,900 a year for a single person. This rises to £60,600 for a couple (meaning £30,300 each). It's important to note that the PLSA's comfortable category is defined as giving a pensioner 'financial freedom and some luxuries.' In this bracket, a pensioner is able to go on a few holidays a year, eat out regularly, and keep money aside for household maintenance. The next bracket down from this is 'moderate', where a pensioner has 'financial security and flexibility,' followed by the bracket where at least all the basic needs are covered and some may be left over for leisure. Assuming a retirement age of 65 – which will continue to rise – this means a pension pot target of £700,000 is ideal to fall into the comfortable retirement category. This depends on a variety of factors however, especially if the pension saver goes down the annuity route. An annuity is a financial product that provides a lifelong, regular income in exchange for a down payment of savings. For a one person, the PLSA says a fund of around £540,000 to £800,000 is ideal to return a comfortable annual payment. From age 55 (rising to 57 in 2028), savers can still take 25 per cent of their pension as a tax-free lump sum. This can be done before purchasing an annuity, meaning it can be drawn from that alongside those payments to make up and annual income. The other most popular pension route is the drawdown option. This involves keeping some or all of the pension pot invested while taking a regular income from it. However, the longevity of this pension pot will depend on its investment performance. A poor investment performance could see £700,000 run out by age 83 when also taking an income of around £40,000. However, an average performance could make it last until age 90, while a good performance could carry the funds far past 100. Further research from Fidelity also shines a light on how much a person should look to have saved at each point in life to achieve a decent retirement income. By 30, experts recommend an amount in savings worth one times your salary. So for someone earning £30,000, this would mean at least £30,000 in savings – both inside and outside of pensions. However, the average person is currently just falling short of this target. Latest figures show that in the 25-34 age bracket, an average £28,277 is held in savings – with around £9,500 in ISAs and £18,800 in pensions. By 40, the guidance rises to twice your salary at that age, and by 50 it's three times as much. This rises to six times your salary at 60 – a target that many will struggle to reach. Government figures show that in the 55-64 age bracket, an average of £178,745 is held in savings. This comprises around £41,000 in ISAs and £137,800 in pensions.
