Sep 23 2008
Retirement income opportunity by MLP
Retirement should not be considered as a difficult part in one’s life. It too can be made productive and yielding by careful financial planning. MLP’s or Master Limited Partnerships gave been found to be fruitful in providing good income opportunities after requirement. This partnership consists of a general partner who is entrusted with the task of operating the business and some limited partners who provide capital. This unique kind of partnership module which is often referred to as publically traded partnerships can be purchased from major stock exchanges by potential investors. Stipulated rules require MLP’s to generate at least 90% of their income from natural resources related activities. This rule thereby makes MLP to operate in the sector of natural resources activities which envelopes the transportation, mining, storage and marketing of these natural resources.
This unique partnership scheme has been found to generate yields ranging between 6% to 8%. MLP’s is a very good avenue for cash flow which is meant to compliment low yield giving equities and bonds targeted towards retired personnel’s who look forward to taking home distributions of about 4% to 6% of their investment portfolio each year. Investing in MLPs provides the investor with higher current distributions which then grows further as and when the company progresses further. Also, the other benefit from these MLP’s is the fact that some percentage of the annual distribution is considered as a return of the capital and thereby exempts it from current income tax subjection. This there by ensures a higher after tax income which boosts the disposable income of the individual after retirement.
Though, what must be kept in mind is that once the investor decides to part ways with these units the deferred units will be subjected to income tax but that may happen many years down the line. Summing it up, it can be said that by means of investing in Master Limited Partnerships, the investor which are mostly retirees get the opportunity to receive 6% to 8% of inflation adjusted distributions where a part of these distributions is tax free.