Posted on 12th March 2019 by Trevor in Blog |Finance in Focus

We notice that our client base gets older every day, as indeed do we.

And edge closer to retirement age.

Some retirees will have a pension or several pensions (state; employer-based; private) to pay the income. Some will have a lump sum.

If a lump sum, how to eke out the amount so you can make income from it without eroding the principal?

Traditionally, retirement income has been paid out by fixed interest securities. When you could get 6% p.a. in most major currencies you could finance a retirement out of a lump sum. And many high-grade bonds would give you a similar yield.

Retirement income can also be paid out of high-dividend stocks. BP, for example, has a dividend yield of currently 6.8% (and, through pension funds, services about 10% of all UK private and corporate pension payouts).

However, there has been no large stock market correction for nine years now, so the chances of the value of a dividend-bearing stock portfolio getting savaged by 50% are quite high (2000-2002, S&P 500 -50.5% top to bottom; 2007-2009, -57.6%). That kind of risk you may not want to take with retirement money.

And for fixed interest, the governments’ response to the 2007-2009 financial crisis was to lower rates to zero, basically sacrificing savers and the retirees to bail out the banks. In this process first-world nations accumulated much larger national debts (end 2018, UK 86.6%; France 97%; USA 107.1%; Italy 131.1%; Japan 253%).

Interest rates, especially in the USA, have begun to edge up again, but they cannot be historically normalized as the debt servicing, i.e. the payment of due interest, would simply be too large for the debtor nations to pay them. First-world government debt has been boxed into a corner.

It is a crucial observation on financing retirement income that cash won’t do it, unless you erode your capital (i.e., spend your money); bonds won’t do it; and the stock market is too dangerous to do it.

In which context we would like to remind you of the Ebisu Income Fund, which is paying 8-10% p.a. on a highly robust process. No losing months (since the first month: set-up costs, nearly nine years ago). All loans made within the fund fully collateralized, with 30-40% safety margin, in case of a borrower default (one to date). Multiple loans ongoing across different time-frames, so there is always money coming back into the fund. Monthly liquidity, so when you wish to withdraw your profits as income, the process will not take more than a couple of months.

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