Recent media reports we are living longer, that is great. However living longer does mean other considerations, as long as you have your health or are reasonably healthy then living longer is wonderful. After your health, hopefully you still are in touch with family or have a support system if the need arrives. Given smaller families over the past few decades, staying in touch with family maybe even more important. From a financial consideration the old adage from asset allocation is take your expected life expectancy minus your age and that would be the portion of growth stocks in the portfolio, the other part would be in fixed income. For decades the old adage worked beautifully.
Linking to dividend paying stocks, since 2000 the old adage has not worked beautifully because of the drive by governments to lower interest rates. The economy of the world changed and there was a tremendous pressure to keep interest rates low allowing inflation to remain low and try to have more jobs in the economy. There are a number of problems with the job front – technology gives us more but there is a growing income gap between what is known as skilled and unskilled work. Due to this growing gap, governments are going to keep interest rates low for the next 3 years plus or when the job rate falls. In 5 to 10 years the job rate will fall because the baby boom will be retiring leading to job shortages and a low unemployment rate. The issue from a fixed income point of view is your return owning bonds will stay relatively low. The solution is to ensure your portfolio has a very healthy dividend stock portfolio. The last number of years the rates of return have been healthy, the risk to own the best companies on the market is relatively low and there is little to suggest the next few years are going to be different.
There are more questions than answers, till the next time – to raising questions.
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