Reasons To Settle For Dividend-Paying Stocks For Retirement
October 20, 2021 (Investorideas.com Newswire) Everyone has a retirement dream that encompasses living a comfortable lifestyle, and that means saving enough money. According to a report on NerdWallet, many financial experts recommend saving at least 10-15% of your income every year. As you near your retirement years, you'll want to ensure you have enough high return on investments to meet your lifestyle goals. Naturally, you'll want to invest in various places, such as IRA plans, guaranteed income annuities, conventional pensions, and 401(k) plans. But have you ever thought of stocks as a retirement investment plan?
Investing in stocks is one of the best investments for your retirement plan because it allows you to boost your savings and survive inflation if the value of shares increases. So, if you're seeking regular income when you stop working, dividend stocks are a great choice. Below are reasons to settle for dividend-paying stocks for retirement.
Dividend Stocks Generate Income
When planning your retirement goals, income should be top of your priority list because once you have retired, you won't be receiving cash flow from salaries or wages. Typically, you'll need to identify other sources of income to cater to your basic needs. To ensure you have regular income to sustain you long-term, you might consider investing in dividend stocks.
In most cases, companies that generate high profits distribute the gains to shareholders monthly or quarterly. This means you'll be earning a decent amount from your investment after every three months, if not monthly. What's more, dividend stocks tend to perform well even when the market crashes, pulling their prices down. With dividend shares, you can rest assured of receiving your monthly cut, meaning you don't have to sell your stocks when it's a bear market.
The value of stocks keeps fluctuating, so you need to be mindful of volatility when buying company shares. Since retirees need to convert investments into hard money within a short period, they can't afford to wait for market recovery when prices fall. On the bright side, dividend shares can lower the overall volatility in your portfolio. To enjoy this perk, you should opt for low volatility exchange-traded funds (ETFs) as they offer equity-style growth with minimal price fluctuation.
You might also want to invest in mature, dividend-paying company shares like utility or consumer staple stocks. Tech stocks make a smaller portion of the portfolio, but it doesn't hurt to include them in your investment plan. According to the Oxford Communique Review, significant growth in the stock market has come from the tech sector over the last two decades. Although many people missed out on the tech stock trend, the market always offers new opportunities, and you can succeed by investing in big tech companies.
Guarantee Better Inflation Hedge
Depending on interest payments from bonds and savings accounts can be stressful when there's inflation. That's because these investments provide the same amount annually, and that money buys a little less every year. Given that stock prices increase with inflation, they are suitable for ensuring you keep up with the impacts of high inflation on your finances.
If you haven't added dividend stocks to your retirement investment portfolio, it's time you rethink your strategy. Owning dividend shares is a sure way of enjoying regular income every month or quarterly. You'll also have the assurance of low volatility and an effective way to overcome the effects of inflation.
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