Three of Motley Fool’s major contributors are out with their top retirement stocks to buy in 2016.
And they are two dominant tech stalwarts in Alphabet Inc. and Apple, and multinational infrastructure giant Brookfield Infrastructure Partners L.P.
“If it's stocks you plan to retire with or will count on for income in retirement, finding businesses with solid long-term prospects, strong competitive advantages, and great management are all critical to investing well,” the Fool
Examining each pick a bit more in detail:
"If you buy shares in Alphabet, you're getting a two-for-one deal," writes Brian Stoffel. "On one hand, you own shares in a company with one of the widest moats in the world -- Google owns 71% of the global search market share. You also get a piece of the world's most popular mobile operating system (Android) and the world's third most popular website (YouTube.com)," he wrote.
"But perhaps most importantly, Google is sitting on a pile of cash -- roughly $71 billion, to be exact. Eventually, I believe that Google, like other more mature technology companies, will begin to pay out a dividend. Over the past 12 months, the company has generated $14.6 billion. If it chose to use just 35% of that cash flow to pay out dividends, it would amount to a respectable 1% dividend yield, but with plenty of opportunity for growth in the future."
"Even if you think Apple has no more growth potential than a Treasury bond, six extra percentage points seems like a more than adequate risk premium to compensate investors for a possible future decline in Apple's business," Dan Caplinger wrote.
"When you consider the possibility that Apple might just come up with the next big hit device, its shares look like a bargain. That's a concept that can be tough to image for a stock with the highest market capitalization in the stock market, but nevertheless, Apple has a lot of attractive features that dividend investors can appreciate."
Brookfield Infrastructure Partners
"Brookfield Infrastructure is very different from Apple and Alphabet, and as a master limited partnership, it's probably not an ideal investment in a retirement account because of how you may lose some of the tax advantage of IRAs and 401(K)s," Jason Hall (Brookfield Infrastructure Partners) wrote. "But if you plan to hold your shares in a taxable account and want steady, dependable income in the form of dividends, Brookfield Infrastructure Partners is a great choice," he wrote.
"This is what makes Brookfield Infrastructure a great retirement stock."
And so even if your retirement portfolio bets pay off, just how much cash will you need to thrive and survive in your "golden years"?
Well, ask a different adviser and you'll get a different answer.
Retirees now need to save $1 million if they want to get half of their income from relatively low-risk Treasury investments, according to new research from Michael Thompson and his co-authors at S&P Capital IQ. That's up from the $200,000 to $300,000 they needed to save to reach the same financial goal between 1990 and 1997 in inflation-adjusted dollars, Thompson told USA Today.
The reason retirees need so much more now? Rock-bottom interest rates on safe investments like Treasurys are to blame, USA Today explained. "It's startling to think like this," says Thompson. "Rates are so low, in order for you to not take exceptional risk to try to have a reasonable retirement portfolio, you need a million dollars in assets."
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