The Wall Street Journal - USA (2020-11-16)

R2| Monday, November 16, 2020 THE WALL STREET JOURNAL.

meanwhile, retirees need to be

strategic about stocks or funds

they own for dividends, says Mr.

Mies of 6 Meridian.

Be wary of dividends with high-

single-digit yields, he cautions.

Dividend yields move inversely to

stock prices, and a lofty one may

suggest investors expect the pay-

out to be trimmed.

Before buying a stock, eyeball

the financial reports. “Generally,

there are signs in financial state-

ments when a company is strug-

gling to pay dividends,” Mr. Mies

says. The dividend-payout ratio—

the percentage of its earnings a

company pays out in dividends—is

one key metric. Above 50% could

be a sign of trouble.

FROM TOP: STEFANI REYNOLDS/BLOOMBERG NEWS; MATTHEW SHAPIRO

Yields on 10-year Treasurys

Sources: Ryan ALM; Tradeweb ICE Closes

6

0

1

2

3

4

5

%

2006 ’08 ’10 ’12 ’14 ’16 ’18 ’20

The Fed has

kept monetary

policy loose

and rates low.

JOURNAL REPORT|ENCORE

M

anaging anest egg seldom has

been more complicated.

Although returns on safer as-

sets have been paltry for some

time, they plunged to new lows

this year as theFederal Re-

serveaggressively loosened its

monetary policy to underpin the economy.

“The challenge facing anyone in retirement is

just being able to generate stable, safe income,”

says Andrew Mies, chief investment officer at

Wichita-based advisory firm 6 Meridian.

Market professionals believe the picture will im-

prove once the nation gets Covid-19 under control.

For now, it may make sense to hold less in

bonds and rely more on appreciation in stocks

and dividend income to get the returns an inves-

tor needs. Here are some other takeaways on how

the investment landscape has shifted and sugges-

tions on how to navigate it:

Keep cash to a minimum

Everyone needs cash. But high-yielding bank ac-

counts now pay less than the 1.2% annualized U.S.

inflation rate. And bank rates won’t rise soon, be-

cause Fed policies are crimping bank margins,

says Bill Lanzon, chief investment officer at First

American Bank, near Chicago.

Anthony Saglimbene, global market strategist

at Ameriprise Financial Services, suggests some

retirees use a three-bucket strategy.

The first bucket should contain enough cash

and short-term bonds to cover projected spend-

ing needs for the next one to three

years. With returns on such in-

vestments so low, some advisers

say this allocation ideally should

represent no more than 15% of the

overall portfolio—although the ex-

act proportion must be tailored to

an investor’s circumstances.

Bucket No. 2 is primarily for as-

sets that produce income. The in-

terest and dividend payments can

be funneled into the first bucket to

help maintain the level of funds

there. An investor with a moderate

risk appetite might keep around

half of the assets in this bucket in

bonds and the remainder in a mix

of stocks, alternatives and cash,

says Mr. Saglimbene.

The third bucket comprises

mostly equities, which are impor-

tant to own, even for people in

their 60s and 70s. While the exact

equities allocation would depend

on an investor’s risk preferences,

Mr. Saglimbene recommends about

60% stocks for a moderate ap-

proach. To raise additional cash

for spending needs and keep the

bucket in balance,periodically trim

any stockholdings that have appre-

ciated a lot more than others.

Watch dividends closely

As the economy tanked this year,

dozens of companies slashed divi-

dends to preserve capital—and

that eroded payouts from divi-

dend-focused funds. The payouts

eventually may be restored, but

BYMICHAELA.POLLOCK

Retirees Search for More Income

Returns on safer assets have

plunged. What’s a person to do to

earn more money?

Use stock appreciation to

supplement income

When investors think about get-

ting income from stocks, dividends

come to mind. But another strat-

egy advisers use is “total return,”

which involves tapping the appre-

ciation in some of the securities an

investor owns to supplement in-

come from other sources.

To implement a total-return

strategy, calculate how much of

anticipated spending needs al-

ready are being met by other regu-

lar income sources, which could

include Social Security. An inves-

tor then would sell some securities

from time to time, using the pro-

ceeds to make up any shortfall.

Raising cash through such

sales should go hand-in-hand

with rebalancing a portfolio, says

Kathy Carey, head of research at

Baird Private Wealth Manage-

ment. Periodic pruning of stocks

that have ballooned in value can

reduce the likelihood that an in-

vestor’s equity allocation gets out

of balance, she adds.

Keep bonds short

Bond income can provide a way to

buffer a portfolio from equity

risk. But for now, bonds pose a di-

lemma, notes Ed Perks, a senior

manager at Franklin Templeton

Investments. Although yields have

risen a little recently, they remain

near historic lows. And if the

economy rebounds significantly in

a year or two—as Mr. Perks be-

lieves is possible—yields could re-

bound also.

In such a scenario, bond prices,

which move in the opposite direc-

tion to yields, would drop, causing

bonds to lose principal value, at

least on paper. Mr. Perks urges in-

vestors to be careful of stretching

too far out on the maturity spec-

trum. Mr. Perks says bond manag-

ers at Franklin currently are

“much more comfortable” with

maturities of two to six years

than with longer maturities.

James DiChiaro, a senior fund

manager at the Insight Invest-

ment unit of BNY Mellon Invest-

ment Management, says broadly

diversified, intermediate-maturity

bond funds offer the best risk-re-

turn mix. Among such funds rated

highly by Morningstar Inc. is Fi-

delity Total Bond Fund (FTBFX),

with an expense ratio of 0.45%.

iShares Core Total USD Bond

Market(IUSB) owns thousands of

individual securities and charges

only 0.06% in expenses.

Mr. Pollockis a writer in

Pennsylvania. Email:

[email protected].

Dozens of companies

slashed dividends this year.

Second Acts

The Difference Between a Doctor and a Florist? Less Than You May Think.

Susan Garetz

• Age: 62


• Hometown:Ann Arbor, Mich.


• Primary Career:Otolaryngologist,
  University of Michigan Medical Center


• Current Path:Floral arranger


• Why This Path:“Now more than ever
  I feel like we all could benefit from
  a little extra beauty in our lives.”

Susan Garetz,aretiredear,noseand

throat specialist, says she became a flo-

rist after retiring for the same reason she

became a doctor: “I wanted to make peo-

ple happy,” she says. “Who doesn’t love to

get flowers?”

Dr. Garetz, age 62, spent 24 years as

an otolaryngologist at the University of

Michigan Medical Center in Ann Arbor.

She says she wasn’t completely sorry to

retire in 2016. While she loved her job

and colleagues, the increasing pressure to

see more patients and fill out more re-

cords on the computer led her to quit

clinical medicine, she says.

Flower arranging became a hobby even

before Dr. Garetz retired. She joined a gar-

den club in 2011 and in 2015 enrolled in a

class that taught Japanese flower arrang-

ing. After retiring, she accompanied her

husband, a professor at the University of

Michigan, on a sabbatical, first in London,

where she took a two-week course about a

flowers, then Sydney, where she had an in-

ternship in a flower shop.

That internship quickly taught her how

little she knew. “It would be a mess and

look horrible, but they were super patient

with me,” she says. The experience also

led her to realize the kindness of florists.

One of the things she enjoyed most

during this period, she says, was discover-

ing how engrossing the world of flower

arranging could be. “I was totally in the

moment,” she says.

A year after returning to Ann Arbor,

she contacted a small flower shop where

a friend knew the owner. The owner

asked her to help out with the Valen-

tine’s Day rush back in 2019, and she was

hired that April.

Though the owner offered to pay Dr. Ga-

retz, she prefers to work without pay, seeing

it as another learning opportunity. It also

leaves her free to travel if she wants to.

Her favorite flowersare peonies and ra-

nunculus, both of which “go through a lot

of stages and are beautiful in all the dif-

ferent stages,” she says.

Her spirits have been constantly lifted,

she says, by hearing the stories of why

customers buy flowers—the man who

usedtocomeineverydaytobuyone

flower for his wife, or the students who

bought flowers for a roommate suffering

from a breakup.

“I felt I could be part of bringing that joy

to people, and I just love that,” says Dr. Ga-

retz, who adds that flower arranging pres-

ents an opportunity to “bring unadulterated

joy into people’s lives with no side effects.”

The flower shop closed to foot traffic for

several months due to Covid-19, but has

since reopened. Dr. Garetz has not worked

at the store since last winter but now helps

fill some orders at a secondary location.

While she was away, she says, she felt

the absence of flowers profoundly.

“It’s like when you’re away from your

spouse and something’s missing,” she

says. “That’s how I feel about the flowers.

I dream about them.”

Second Acts looks at the varied paths

people are taking in their 50s and beyond.

You can reachMs. Halpert, a writer in

Michigan, and let us know how you’re

starting over, [email protected].

Susan Garetz loves to hear people’s stories about why they are buying flowers.

BYJULIEHALPERT