High-Income Retirement: How to Join the 1% With Simple Investing
Many high-income earners have a disconnect from the reality of the average American. They often live in an unimaginable ivory tower, with little understanding of the everyday struggles that most people face. However, the average high-income earner, who earns $500,000 or more annually, typically has about $2.68-$3 million saved towards retirement. This means that the vast majority of them have about 5 times more in their retirement account than the average American, who retires with an average savings of $537,000.
If we apply the golden rule of retirement planning and use the 4% withdrawal rule, that individual who has $3 million in their retirement account would retire with about $120,000 annually from their portfolio. Comparatively, if we were to use our unique income method and apply the principles found therein (we can use these two examples we provided you with today) to earn an excess of 13% yields from your money. For instance, if you had $1,000,000 in your retirement account, you could retire on $130,000 a year, outperforming many from the top 1% of income earners within the United States.
This means that you can hypothetically join the 1% in their retirement by using simple tools to elevate your earnings to higher levels. While there is often more risk involved in taking on a higher yield, careful application of fundamental research on the securities and adequately diversifying will reduce that risk considerably.
Two Great Income Investments
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XFLT: Yield 14.6%
XAI Octagon Floating Rate & Alternative Income Trust (XFLT) has been a fantastic investment for income investors. It focuses on leveraged loans, which are senior secured loans made by banks to companies that typically fall in the B/B+ credit rating range. XFLT invests in these loans directly and indirectly through CLOs (Collateralized Loan Obligations).
Despite the volatility in its share price, XFLT has consistently paid out a high dividend yield. The company has been able to maintain its distribution by investing in a diversified portfolio of loans and CLOs and by using leverage to enhance its returns.
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AWP: Yield 13.1%
abrd Global Premier Properties Fund (AWP) is a CEF that invests in REITs around the world. It has been directly impacted by the market’s tantrums over rates. However, AWP has a diversified portfolio with its highest concentrations in industrial and retail REITs. The company also has significant exposure to non-U.S. REITs, which have outperformed U.S. REITs in recent years.
Despite the market’s volatility, AWP has continued to pay a high dividend yield. The company has been able to maintain its distribution by investing in a diversified portfolio of REITs and by using leverage to enhance its returns.
Conclusion
With AWP and XFLT, investors can leverage the skills and abilities of portfolio managers to enjoy high yields from sectors that can offer considerable value. By mirroring the techniques of high-net-worth individuals, investors can also mirror their retirement lifestyle as far as income is concerned.
