Skip to main content
No. of Recommendations: 0
Your idea is a good one. You could also have done
the same thing using bonds (a little safer) but currently you can get a higher rate with the preferreds and LPs.
An LP in a retirement account is good because you don't have to wrestle with the K-1 every year.
Most preferreds are callable after a period, commonly 5 years. If interest rates go down, the preferreds can be called away from you and it may be difficult to replace them in the interest rate environment that caused the issuer to call them away in the first place.
Stocks that pay an exceptionally high dividend may be about to reduce the dividend. Dividends have to be voted on each time by the board of directors, and there is nothing to keep them from omitting or reducing a dividend if the company falls on hard times.
Limited partnership distributions can also fluctuate wildly with the business climate.
Another strategy is to have shares in a growth stock and sell some as needed to raise income. I saw a presentation once which detailed this scenario: You invest $100000 in Magellan at the beginning of the Peter Lynch era. You take out cash for living expenses every month from the beginning which you raise by selling shares. You live nicely but every year you have a stake worth more than the year before. You continue this and after 20 years or so you have
millions even though you have been withdrawing from the account every month since inception.
I forget the exact numbers, but it was pretty impressive.
My bonds are structured so that in retirement I will receive interest every month; to do the same with preferreds would be reasonable. A problem I see is that preferreds seem to most all pay dividends at the end of the quarter, but it should be possible to keep some of that money for the next two months that will be quite dry and keep the investments in place and the income streaming.
Best wishes, Chris
Print the post  


The Retirement Investing Board
This is the board for all discussions related to Investing for and during retirement. To keep the board relevant and Foolish to everyone, please avoid making any posts pertaining to political partisanship. Fool on and Retire on!
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.