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When you’re planning for your retirement, it’s important to make sure you’ve got sufficient income to live a comfortable lifestyle when you quit working.
There are a number of ways in which people can prepare for their later years, but one popular option is to invest in high dividend blue-chip stocks. These stocks have been proven to have a consistent track record in paying out increased dividends year-on-year, so they’re a relatively safe investment choice. However, is it really possible to live off your dividends during your retirement?
Why Are Dividends A Great Retirement Income Choice?
When you’re weighing up your various long-term investment options during your financial planning for your retirement, high dividend stocks are one of the safest options, especially for anyone who has limited investment experience. Dividends are passive income and require very little hands-on management. This makes them a low-maintenance choice, especially if you want all of the benefits of regular income with none of the hassle of most other alternative investment options such as property investment. When you choose the right stocks to add to your investment profile, it’s possible to make ongoing regular sums of money.
Is It Possible To Live Off Dividends?
When you’re looking for an ongoing income to ensure you can enjoy a good standard of living throughout your retirement, you’ll need to know how to live off dividends, or even if such a thing is possible.
It’s true to say that generating sufficient income to be able to live off your dividends is more of a marathon than a sprint. You will need to be in it for the long-haul. But that doesn’t mean that you should delay taking action. You should begin saving for your retirement by launching the right investment portfolio straight away. There’s one thing for certain – you won’t be able to live off your dividends immediately, but it’s certainly something that can happen with time, with a well-thought-out strategy and with a good plan.
How Do You Build An Investment Portfolio For Your Retirement Income?
The secret to success when it comes to living off dividends in retirement is to make sure you’re focusing on investing in growth dividend stocks. These increase dividend payouts every year, and this increases your income with no need for you to lift a finger. So, here are some expert tips to point you in the right direction:
- Use a brokerage offering the lowest possible commissions fee trading, and preferably one that offers trading commission-free.
- Allocate 20% of the portfolio to dividend kings.
- Allocate 35% of your portfolio to dividend aristocrats
- Allocate 30% of the portfolio to dividend stocks that are up-and-coming.
- Allocate 15% of the asset allocation to international dividend stocks.
To be able to live on your dividends, you need to make sure your dividend won’t decrease in value over time. Both stock appreciation and income need to be stable to ensure a regular income.
A Five-Step Investment Plan To Ensure You Can Live Off Your Dividends In Retirement
- Set up automatic contributions of at least $200 monthly to be paid into your dividend portfolio.
- Increase those monthly contributions every year by 25%.
- Once your dividend income is received, use that money to purchase more stock.
- Choose to make investments in high-quality stocks that allow you to obtain a growth rate of 6% in your equity value.
- Over time, repeat the above steps 1 to 4.
What Are The Key Takeaways I Need To Know?
There are two primary takeaways you need to know with regard to living off your investment dividends during your retirement.
Firstly, you need to increase both your savings and your income over time. It’s impossible to reach your maximum goal if your income doesn’t continually increase.
Secondly, you need to begin as early as possible. If you haven’t already made your first investments, it’s time to start today. Contribute as much as you can regularly and maintain annual increases in contributions. Remember to focus on improving your investments over time, and use due diligence to ensure you’re choosing the best possible stock options.
Are Dividend Paying Stocks The Right Choice For My Retirement?
Only you can decide whether you want to rely on dividend-paying stocks as the source of your retirement income. However, they do represent a low-maintenance and proven way to generate ongoing income in the long-term. While it won’t be the best option for everyone, this investment strategy, when applied wisely, could be the best way to ensure you can enjoy a high standard of living for many more years to come.
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This content is brought to you by Wahab Ullah.
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