My Top Retirement-Investing Strategy For 11% Dividends

Do you know how much money you need to retire?

If you’re like most people, you might think the answer is “too many,” and for good reason. It seems like every day we hear another study or pundit saying we need millions of people to do this comfortably.

That’s why I was surprised to see a new study from NetCredit, an online moneylender, that said most people would need less than a million dollars to retire. In fact, the company said it’s only possible to clock out at $702,330 across the US, and even less in some states – like nearly $470,000 in Mississippi.

These numbers are much more encouraging than what we usually hear, but do they add up? let’s take a look.

NetCredit obtains its data from Numbeo.com, which is crowd-sourced, so its data may not be fully representative of the average person’s reality. But it’s not completely off base either.

The bigger potential problem is NetCredit’s method of crunching Numbeo’s numbers. NetCredit took an average life expectancy of 76.2 years and a retirement age of 61, then multiplied the average middle-class income in the area by the difference of 15.2 years. So, for example, it costs $701,000 a year to retire in Oregon because the average Oregonian spends $46,310 per year per person.

The point here is that if you live beyond age 76.2, you run the risk of outliving your money. The same goes if you make a loss investing – or decide to retire earlier.

Luckily, we can do better.

CEFs can let you retire anywhere on $470,000

If NetCredit says we can retire in Mississippi on $470,000, I agree. but i also think you can retire anywhere in the US on that amount. Doing so starts by purchasing my favorite high-yield vehicles: Closed-End Funds (CEFs)who can pay us a but not Three Ways:

1. With their high dividend payouts: These funds yield 7% today, and many yield much higher. All three, which we’ll discuss in a moment, yield an average of 11.8%.
2. Through portfolio leverage: CEFs hold stocks, bonds, real estate investment trusts (REITs), and a range of other investments, just like mutual funds and ETFs. They trade on public markets just like stocks.
3. His missing exemption for Net Asset Value (NAV): The discount to NAV, or the difference between the fund’s market value and its per-share portfolio value, is unique to CEFs. Buy when the discount is unusually wide and “move along” when it narrows, driving the stock price up as much as you can.

With that in mind, let’s move on to the three-CEF retirement portfolio I want to show you today:

As you can see above, all three of these funds have high yields with average payouts of 11.8%. And you’re getting attractive valuations here too, with two of our funds trading at deep discounts to NAV and only one, PFN, with a premium (albeit marginally).

As the name suggests, with NBXG you are also getting some strong diversification, such as a focus on networking companies. Analog Devices (ADI), Nvidia Corp (NVDA) And Palo Alto Networks (PANW). PFN, for its part, holds corporate bonds issued by quality companies such as Nissan, Ford, Albertsons and Northwestern Bell. Finally, AWP has a diverse collection of REITs, such as warehouse owners Prelude (PLD), data-center operator Equinix (EQIX) And Mid-America Apartment Community (MAA).

Furthermore, all three are professionally run firms with billions of dollars (or trillions in PIMCO’s case) in assets under management, as well as deep ties to their industries.

Then there is the story of dividends.

A long history of steady payouts (even with the odd special dividend)

While NBXG, whose payouts are shown in blue above, is a new fund (launched a year ago), AWP and PFN have stable payout histories spanning over a decade. Plus, as you can see from the spikes and notches in the above rows, these funds also pay some healthy special dividends from time to time.

the kicker? Each of these funds pays a dividend Monthly. So we don’t have to worry about managing our income stream like we would with quarterly payers. Our dividends come directly into our accounts as per our bills.

The bottom line is that you could put $470K into these funds and receive $4,621 per month in dividends. I’ll admit, it’s not exactly the $4,911 per month NetCredit says you need for a comfortable retirement in Hawaii, but it’s pretty darn close!

More importantly, you can receive your payment without touching your principal. In other words, you can live off your $470K in savings for not just 15 years, but several decades as these funds pay out.

Michael Foster is Lead Research Analyst opposite point of view, For more revenue ideas, click here for our latest report”Perpetual Income: 5 bargain funds with steady 10.2% dividend.,

Disclosure: none