If you are looking for financial security come retirement time, I highly suggest grabbing stocks that pay dividends. Dividend stocks, coupled with your 401K, means come retirement at 60 you’ll be set. The average person only focuses on their 401k and hopes that it will get them through their retirement years. Sadly, in recent years due to inflation this no longer a reality. Unless you work from the age of 16, contribute 18% to 25% of your check each month, retiring at 67 will be hard to do. A lot of people are working well into their 70’s because that is what they need to do pay their bills.
Dividend investing is a way to guarantee a happy and fruitful retirement. The earlier you start, obviously, will help you in the long run but anyone at any age can start. Setting aside $500-$1000 (this will depend on your situation) a month, along with your 401k at 12%-14% each month is what I would say is ideal for a good retirement. Let us run some examples. We will use $500 as our base as it is more reasonable for the majority of the population.
- Reinvesting your dividends each year will increase these figures.
- 20 Years – $120,000 invested.
- 30 Years – $180,000 invested.
- 40 Years – $240,000 invested.
- 50 Years – $300,000 invested.
Now imagine the figures above coupled with your 401k which we will say has $750,000 (minimum needed) in it by the time you are 67, if you started working at 16 and never stopped. To some this might be unrealistic but my father began working at 16 and never stopped. He managed to put away 18% of each check into his 401K while taking care of 6 six kids and sending 2 of them to college. His monthly check plus social security is enough to pay his bills and have enough extra to live comfortably. Mind you, he still takes care of 3 of those kids. Now imagine if he had found a way to have invested $276,000 (46 years working), by the time he retired. He could have had an extra $3,000-$4,000 a month in dividend income depending on the stocks he chose.
This might be a scary thing as companies fail, or the company stops giving out dividends. If you play it safe and pick dividend kings or aristocrats then this won’t happen. If you want to be a bit more aggressive this is a potential risk, but if you watch your portfolio you can sell off stocks before the bad happens or sell stocks that end their dividends. Either way you can pour that money you made from selling into other safe stocks or spread it around the ones you have. The safer you are the less you will make per month, the more moderate or aggressive you are the more you’ll end up with. However, moderate to aggressive strategies will require you to monitor your portfolio and check in on those companies you are investing in.
I hope this helped you a little in your decision whether or not to invest in dividend stocks but if my opinion matters, I think you should do it. Not much to lose and everything to gain. Retire early or at 67, how you go about it is up to you.
You miss 100% of the shots you don’t take – Wayne Gretsky.