Baby boomers are looking for and need income.  This is a simple fact.  The 76 million "boomers" will be retiring in a time when social security will not come close to satisfying retirement income needs, and when there has been a drastic reduction in the availability of defined benefit pensions to supplement social security.

Preferred stocks represent one of the most overlooked sources of income available.  Once they are understood, they should be included in any portfolio designed to generate income.  Unlike common stocks, preferred pay a fixed dividend each and every year.  Unlike bonds, preferred stocks represent ownership in the company, not a loan.  Preferred stocks are generally issued by companies in financial, real estate, communications and energy sectors of the economy.  In recent months, these areas have been hit hard  by concerns over the credit crunch.  This has only made preferred stocks more attractive, since the dividend has held, and the share price provides an opportunity for capital gain.

Preferred stock dividends, in most instances, qualify for very favorable tax treatment. Dividends are taxed at only 15%. A bond yielding 6.47% produces an after tax return of 4.21% for a 35% taxpayer.  A preferred stock with a dividend of 6.2% will yield an after tax return of 5.27% and an opportunity for capital gain as well.

For those who don't want to select their own portfolio of preferred stocks, there are mutual funds that will handle the selections, and manage the portfolio.  In their search for predictable, safe sources of income, baby boomers should look carefully at preferred stocks.  For assistance in identifying alternatives, or for further information, please contact us at info@associatesgroupinc.com