Fewer and fewer Americans expect to retire by age 65. That’s because, in part, the Federal Reserve has left a growing number of Americans in the lurch when it comes to their retirement savings.
With the outlook for the global economy weak and interest rates expected to remain near historic lows for years, the future remains bleak for those nearing retirement. While the stock market remains volatile, there are a number of excellent stocks that continually buck the broader trend and provide investors with consistent capital appreciation and consistently higher annual dividends.
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Retirement Nest Eggs Not All They’re Cracked Up to Be
The traditional retirement age of 65 may be going the way of the dodo. But that’s not because Americans are retiring at an earlier age. Instead, they’re waiting longer to retire—mostly because they have to. In fact, one-third of Americans are not able to retire as young as they’d hoped.
Yes, some want to continue working, but most will continue to work because they have no choice. Depending on Social Security, 401(k)s, and the shape of the economy, investors have lost a lot of money, despite the bull run that has seen the S&P 500 make triple-digit gains since 2009.
Keep in mind that you have to have discretionary income kicking around to take part in the stock market. And many of us do not have that extra cash just lying around. According to a 2015 survey on retirement preparedness, 57% of Americans have $25,000 or less saved for retirement (excluding the value of their primary home and any defined benefit plans). In 2010, a year into the so-called recovery, that number stood at 54%. (Source: “Preparing for Retirement in America,” Employee Benefit Research Institute, last accessed February 19, 2016.)
Almost all other metrics have declined since 2010. The percentage of Americans with $25,000–$250,000 saved for retirement has declined from 34% in 2010 to just 29% in 2015.
The only category that has increased is the percentage of Americans with $250,000 or more saved for retirement. That category has increased from 11% in 2010 to 14% in 2015.
And so the great divide gets even greater.
The Economic Recovery That Never Was
The so-called economic recovery that has swept over the U.S. since 2009 really never impacted anyone outside of Wall Street. The S&P 500 and Dow Jones Industrial Average notched triple-digit gains between 2009 and 2015, but the average American wasn’t invited to the party.
Unemployment rates went down, but most new jobs were in low-paying sectors and part-time jobs. Underemployment was above 10% during this time period. Wages were stagnant and debt levels were near record-highs. Even food stamp usage has skyrocketed. In 2007, before any ripples of the financial crisis and housing bubble were felt, 26.3 million Americans received food stamps. Today, that number stands at close to 46.0 million, approximately 15% of the population.
It’s fair to say most Americans are not even aware we’re in an economic recovery—or rather, were. Wall Street is finally catching up to what Main Street has been forecasting for years. Investors can only support an overvalued stock market for so long. The underlying fundamentals have to match reality at some point. Welcome to 2016.
Four rounds of quantitative easing (QE) and artificially low interest rates may have helped those with money make more money, but it decimated the retirement plans of those who prudently held fixed-income investments like, CDs, bonds, and Treasuries and were hoping they would help carry them through retirement.
Sure the Federal Reserve raised its key lending rate in December for the first time in nearly a decade, but it’s still near historic lows. And the state of the global economy means the Federal Reserve may have to hold back on any further rate hikes in 2016. The global economic outlook for 2017 is pretty underwhelming, too.
The Best Buy-and-Hold Stock for Retirement
If anyone asked me what the best buy-and-hold stock would be for retirement, I’d have to say Altria Group Inc (NYSE:MO).
Admittedly, a lot of investors are not fond of so-called sin stocks. If you fall into that category, looking at the largest cigarette maker in the U.S. may not be up your ally. But, if you want a company that makes money and rewards investors with capital appreciation and consistently higher dividend yields, you may want to give MO stock a closer look.
For starters, Altria has rewarded investors with annual average growth in excess of 20% over the last half-century. In 2015, after years of putting up double-digit growth, the S&P 500 declined -0.7%. Altria Group’s share price climbed 23.0%.
So far, in 2016, the S&P 500 has been as volatile as a super nova and is down six percent. Altria, on the other hand, is up five percent.
For income-starved investors, Altria is also a great pick. The company’s annual dividend yield currently stands at 3.73% or $2.26 per share. Best of all, it’s raised its annual dividend for the last 46 consecutive years.
No matter what the U.S. or global economy is going through, Altria has been increasing its annual dividend and rewarding shareholders and those nearing retirement. That’s not something the Federal Reserve can lay claim to.