The High Cost of Having Fun
How does 5,000 days of leisure sound to you?
5,000 days of golf. 5,000 days of traveling the world. 5,000 days on the beach. 5,000 days playing with grandchildren…
That’s roughly how many days you can expect to spend in retirement if you retire at age 65 and reach the average life expectancy of 78.
The numbers vary by gender. Men can expect to live an average of 76 years while women reach 81 on average.
The challenge that accompanies those 5,000 days of leisure is the small fortune you’ll need to finance it.
Having fun ain’t cheap!
Those long years of retirement become a problem if you outlive your retirement savings and too many — if not most — Americans are finding their retirement savings don’t throw off enough income to finance their dream lifestyle.
This is due to two reasons: low interest rates and inflation.
I don’t have to tell you about low interest rates. You probably know that the most you can conservatively make on your money these days is about 2%.
Who Can Live on That?
Moreover, it is important to invest in growth because of inflation. Many things retirees regularly buy — food, prescription drugs, health care, travel, real estate taxes, transpiration — keep getting more expensive as the years go by.
Sure, you should invest more conservatively when you retire, but that doesn’t mean that you should completely get out of the stock market.
You need to achieve at least some modest growth in your investments.
And I’m not talking about the minuscule cost of living increases that you’ll get from Social Security.
What I am talking about is the ideal investment vehicle for retirement: dividend paying stocks.
As the above table shows, the dividend payout of the dividend-paying stocks of the S&P 500 have consistently been in the 10% range.
Unlike a bond whose payout is fixed, dividend payouts have regularly increased and done so at a pace higher than inflation for the last decade.
And it doesn’t matter whether the stock market goes up or down, the dividend payout has increased.
The Perfect Retirement Asset
That’s how you slay inflation and that’s how you slay low interest rates. And that’s how you successfully finance 5,000 days of retirement leisure.
If you’re more of an ETF investor, there are several dividend-focussed ETFs I urge you to consider, such as Vanguard Dividend Appreciation (VIG), Schwab U.S. Equity Dividend (SCHD), and ALPS Sector Dividend Dogs (SDOG).
However, I think you can do much better with a carefully selected portfolio of individual dividend-paying stocks.
And as it turns out these are exactly the type of stocks that I recommend in my Infinite Income service.
Here’s to growing your wealth,
Chief Income Expert, Mike Burnick’s Wealth Watch