Royalty Trusts Are One of the Worst Ways to Supplement Social Security

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Few investments throw off income as generous as royalty trusts. BP Prudhoe Bay Royalty Trust (NYSE: BPT  ) , for example, currently yields 12.75%. Even that's small potatoes when compared with SandRidge Mississippian Trust I (NYSE: SDT  ) , which yields 27.5%, or SandRidge Mississippian Trust II (NYSE: SDR  ) , which yields 29.28%.

Yet as high as these payouts are now, these are among the worst investments to make to supplement Social Security, for the simple reason that there is no security when investing in a royalty trust. The payouts of all three trusts can fluctuate from quarter to quarter or could offer no growth at all, and all three will cease to exist at some point in the future.

I created the following slideshow to help investors better understand why royalty trusts are such a bad idea to use in supplementing Social Security. The presentation shows just how much the income from these trusts can fluctuate, as well as the likely expiration date of the payouts. The presentation also contains a link to a special free report that details a much better way to supplement Social Security. 

How to get even more income during retirement
Or you can skip all that and head strait to our special free report. In the report you'll find details on a simple strategy to take advantage of a little-known IRS rule that can help ensure a more comfortable retirement for you and your family. Click here to get your copy today.

 


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  • Report this Comment On June 09, 2014, at 3:55 PM, Prudent1959 wrote:

    Your conclusion is based on variable distributions which is indicative of royalty arrangements. BPT's royalties are based on the performance of WTI oil prices which is trending higher. BPT's distributable life has been extended beyond 2029 and that does not include the additional wells BP Alaska is drilling for the next five years. Your article is short on facts and analysis. BPT's average distribution yield has been over 11% for over 15 years.

  • Report this Comment On June 20, 2014, at 10:10 AM, HavanaRicki wrote:

    Having seen the trans-Alaskan pipeline at Valdez, it would astound me to learn that billions were spent on this project if the north slope field were short-lived. I suspect BP will be pumping there for decades.

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