Tough Times for Retirement Saving Call for …

by Marc Bastow | November 15, 2012 12:36 pm

All together now: deep breath, big sigh, shake of the head and stay calm.

I know how you feel. It’s not going very well right now, is it? Retirement, whether you’re reaching for it or living it, isn’t easy when all appears to be going south. We have every reason to grumble:

• Stock market indexes are down across the board over the last three months: 4.5% on the Dow, 3.5% on the S&P 500, and a whopping 6% on the Nasdaq.
• 401(k) and retirement portfolios are down along with the indexes. All you have to do is open your statements to see that’s the case.
• As we all stare at the fiscal cliff (and InvestorPlace Editor Jeff Reeves[1] argues that it’s meaningless[2]), it’s inevitable that changes are coming, most notably in the tax rates for dividends and capital gains.
• Speaking of dividends, our favorite dividend stocks like Exxon Mobil (NYSE:XOM[3]), Procter & Gamble (NYSE:PG[4]), McDonald’s (NYSE:MCD[5]) and IBM (NYSE:IBM[6]), just to name a few, are getting creamed.
• Our Oracle and guiding light Warren Buffett has abandoned us, jettisoning nearly 10 million shares of Johnson & Johnson (NYSE:JNJ[7]) during the quarter according to Berkshire Hathaway’s (NYSE:BRK.A[8], NYSE:BRK.B[9]) 13-F SEC filing[10].
• Finally, just to pour a little salt into the wounds, we didn’t get out of Apple (NASDAQ:AAPL[11]).

Alright, with all that off our chest, it’s time to look forward. What should we do? Well, we could take another tip from Jeff Reeves and just do nothing in November[12]. That’s quite appealing if not somewhat impractical.

How about we get a little bit more proactive and start looking for some bargains amid the rubble? First, we have to assume dividend income will get taxed at higher rates, but I wouldn’t panic[13] about dividend taxes jumping dramatically.

If you’re nervous about individual stocks, exchange-traded funds are a nice way to play, and an excellent article in Traders Reserve provides a list of five ETFs that are paying “phat” dividends[14].

For those interested in dipping back into individual stocks, the pool is still pretty deep with great names that pay juicy dividends and are now trading at a discount. W.W. Grainger (NYSE:GWW[15]) trades at 18% below its 52-week high, with an 80-cent quarterly dividend. Indeed, according to Dividend Channel[16], the stock is now oversold.

How about this idea? Since Mr. Buffett crushed our dividend-loving spirit with his rotation out of JNJ, what about his new favorite, Deere (NYSE:DE[17])? Buffett’s 4 million-share stake has to be a signal, and although the stock is within $5 of its 52-week high, it still provides a 2.15% dividend yield. Buffett must feel good about Deere’s future, so why not play along?

Here’s one more worth another look: Intel (NASDAQ:INTC[18]) is now in its corner shaking off the cobwebs from a combo that knocked it silly. Slow to negative growth[19], some rumors about Apple dumping the chip king[20] from the MacBook line and general negative sentiment for semiconductor sector have the stock trading at near 52-week lows.

All of which suggests a slow drip back in, at least according to an analysis[21] by Ashraf Eassa on Seeking Alpha. He believes that “small bites and adding to the position on big-gaps down” can help fuel a 401(k) plan without major risk. With a 4.47% dividend yield on a 22-cent quarterly dividend now, Intel has plenty of fuel for future dividend hikes[22].

Still, if you’re absolutely, positively sure that you don’t want to play the game anymore, by all means get out. Put your money in U.S. Treasury securities, CDs or under the mattress — anything that keeps you sleeping through the night.

But if you’re in this for the longer term, don’t panic. I know how you’re feeling. But let’s be prudent, smart and informed. There now…deep breath. Better?

Marc Bastow is an Assistant Editor at InvestorPlace.com. As of this writing he is long AAPL, INTC and JNJ.

Source URL: https://investorplace.com/2012/11/retirement-woes-deserve-an-airing-and-planning-xom-pg-ibm-mcd-intc-gww/

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