I like these 2 strategies to increase my retirement income after the Fed rate change

The Federal Reserve gave the stock markets a huge boost as it offered a sizeable 50 bps interest rate cut, much more than many experts expected. It wasn’t just stocks, which benefit greatly from a lower rate environment, that rose on the news. Gold and Bitcoin (BTC) rose on news of big Fed tapering.

It’s not clear how much of the shrinking climate is covered right here. However, it’s never a bad idea to prepare for rate cuts. While a world of low rates is good news for most investors, retirees have to put up with lower yields and rates on dividend stocks and certificates of deposit (CDs), respectively. If you’ve checked lately, you’ve probably already noticed that rates and yields are already well past their peaks. As the Fed continues to lower rates, there is a good chance that rates and yields will continue to fall.

While it sure would have been nice to get a 4% annual return without having to risk capital, I think there’s no reason to worry about the coming low-rate environment if you’re a retiree who doesn’t want to you are extending yourself too much. themselves at risk to achieve a level of passive income to meet their retirement lifestyle.

In this piece, we’ll explore two strategies to help your passive income portfolio adjust as the Fed looks to continue cutting rates.

Key points about this article

• Retirees may want to consider returning to “risky” assets as rates on risk-free securities fall in anticipation of future rate cuts.
• Johnson & Johnson and American Tower appear to be solid income for investors looking for a good combination of dividend growth and relative safety.
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Cheap dividend stocks are worth buying before their yields fall further

With the first rate cut on the books, some retired income investors may be kicking themselves for not punching their ticket to their favorite dividend stocks sooner. Depending on where you look, dividend yields are slightly below where they were a few months ago, when a 50bp rate cut from the Fed would have been a far-fetched thought. Of course, you can’t go back in time and snag the best bargains from a few months ago, but I’d argue that the broad basket of dividend plays is still relatively cheap, with yields still at the top.

Johnson & Johnson (NYSE:JNJ) stock is just a top-notch dividend payer, still boasting an attractive yield just north of 3%. As the nearly $400 billion pharmaceutical giant sees new drugs as a source of growth while its medtech segment shrugs off headwinds, you’ll also get some impressive (dividend) growth from the name . Indeed, the talcum powder lawsuit headlines continue to emerge, but the real opportunity, I believe, lies in the company’s ever-improving long-term growth prospects.

With a price-to-earnings (P/E) ratio of 15.15, I’d argue that JNJ stock is a dividend producer that can help deliver consistent growth in your golden years. So if you’re looking beyond risk-free assets for income that can grow, JNJ is one of many names to check out.

The same goes for real estate investment trusts (REITs).

Don’t forget real estate investment trusts (REITs), many of which are still offering hefty returns after the Fed’s first tapering. As rates fall, some of the REITs that took the most damage from the 2022 selloff driven by rising rates could stand to gain.

American Tower (NYSE:AMT) is a cell tower REIT that was already on the rise before the rate cuts. That said, I think there’s still room to run as the company looks to “plant” capital investments. Looking ahead, the company plans to spend up to $1.7 billion on growth projects. As rates drop, look for American Tower to become even more aggressive as the rise of artificial intelligence (AI) paves the way for better connectivity.

After rising nearly 39% over the past year, AMT stock is now yielding a relatively light 2.79%. Despite the lower yield, American Tower looks well-equipped to grow its payout faster than rivals, especially as it gets a break in the form of significantly lower rates. At 34.8 times forward P/E, AMT stock might not seem like a bargain, but if you’re looking for a top dividend producer, it’s hard to overlook the name while it’s still 20% off maximal.

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