Retirees, Earn Higher Yields While Doing Good with Impact Investments
Older investors are increasingly finding ways to collect income without sacrificing their principles.
What if you could measure your investment performance not only in terms of yield and total return but also small businesses financed, tons of waste reduced, and affordable homes created?
A growing number of “impact” investments allow investors to do just that—while also earning decent yields.
Impact investments belong to a broader principles-based investment universe that also includes mutual funds focusing on companies with strong environmental, social and corporate governance (ESG) track records (read “ESG: Invest in Line With Your Values,” and “Can Sustainable Bonds Save the World?”). Rather than simply encouraging socially responsible corporate practices, however, impact investments aim to have a direct and measurable impact on society or the environment.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Retirees are increasingly drawn to these vehicles, which held more than $500 billion at the end of 2018, according to the Global Impact Investing Network. Many older investors are thinking about the legacy they want to leave future generations, “and that type of long-term thinking is very much in line with what motivates impact investors,” says Amit Bouri, GIIN’s chief executive officer.
While many of these vehicles are conservative fixed-income instruments, they’re not without risk. Check liquidity restrictions carefully: Some products are designed to be held to maturity.
Options for Impact Investors
One of the more established impact investments available to individual investors is the Calvert Community Investment Note, launched in 1995. The note’s portfolio consists of intermediaries and funds that finance affordable housing, community development, education and other initiatives. The minimum investment is just $20, and investors can currently choose maturities ranging from 2020 to 2034, with interest rates of 1.5% to 4%. Although the product doesn’t offer any guarantees, it has repaid 100% of principal and interest since inception, says Justin Conway, vice president of investment partnerships at Calvert Impact Capital.
CNote offers similar fixed-income products but focuses on economic inclusion. The firm’s flagship note yields 2.75% and invests in federally certified community development financial institutions (CDFIs), which fund loans for small businesses and to support sustainable economic growth and affordable housing.
Early this year, CNote launched the Wisdom Fund, which invests in CDFIs that lend to female entrepreneurs. To close the gender wealth gap, “we have to focus on lending to women, and particularly women of color,” says Catherine Berman, CNote’s chief executive officer. The minimum investment is $25,000, and the fund is designed to generate a 4% annual return over a five-year term. The fund is currently available only to accredited investors—those who have $200,000 in earned income or a net worth of more than $1 million, excluding the value of their home—but CNote may open the fund to nonaccredited investors in the future, Berman says.
Aspiration takes the impact concept a step further, urging customers to think not only about the impact of their investment dollars but also their everyday spending. In the Aspiration Spend & Save Account, customers who make a deposit of at least $1,000 each month earn a 2% yield. Aspiration is not a bank, but it sweeps customers’ cash to institutions that offer federal deposit insurance and do not lend any money to oil and gas companies.
The firm also scores thousands of companies on how they treat their employees and the planet, so customers can “make spending decisions based on that,” says Andrei Cherny, Aspiration’s chief executive officer. The account fee is “pay what is fair,” meaning customers can set their own fee—even if it’s zero.
To continue reading this article
please register for free
This is different from signing in to your print subscription
Why am I seeing this? Find out more here
-
Why Spotify Stock Is Soaring After Q1 Earnings
Spotify beat expectations for the first quarter and its stock is notably higher following the report. Here's why.
By Joey Solitro Published
-
Is a Phased Retirement Right for You?
Want to keep working, just not as hard? A phased retirement may just be the answer.
By Kimberly Lankford Published
-
403(b) Contribution Limits for 2024
retirement plans Teachers and nonprofit workers can contribute more to a 403(b) retirement plan in 2024 than they could in 2023.
By Jackie Stewart Published
-
SEP IRA Contribution Limits for 2024
SEP IRA A good option for small business owners, SEP IRAs allow individual annual contributions of as much as $69,000 a year.
By Jackie Stewart Published
-
Roth IRA Contribution Limits for 2024
Roth IRAs Roth IRA contribution limits have gone up for 2024. Here's what you need to know.
By Jackie Stewart Published
-
SIMPLE IRA Contribution Limits for 2024
simple IRA The maximum amount workers at small businesses can contribute to a SIMPLE IRA increased by $500 for 2024.
By Jackie Stewart Published
-
457 Contribution Limits for 2024
retirement plans State and local government workers can contribute more to their 457 plans in 2024 than in 2023.
By Jackie Stewart Published
-
Roth 401(k) Contribution Limits for 2024
retirement plans The Roth 401(k) contribution limit for 2024 is increasing, and workers who are 50 and older can save even more.
By Jackie Stewart Published
-
Four Tips for Renting Out Your Home on Airbnb
real estate Here's what you should know before listing your home on Airbnb.
By Miriam Cross Published
-
Five Ways to a Cheap Last-Minute Vacation
Travel It is possible to pull off a cheap last-minute vacation. Here are some tips to make it happen.
By Vaishali Varu Last updated