“My goal is to supplement my Social Security in a big way.”

Dear DTA,

My goal is to supplement my Social Security in a big way.

-Tim B.

Thanks for taking the time to write in, Tim.

While Social Security is a nice safety net for people, it’s become instead the sole income source for a lot of retirees. Not originally designed to pay for decades of retirement, many folks of advanced age are forced to figure out how to live off of their their Social Security income alone because they didn’t save and invest ahead of time.

But it’s great that you’re taking the time to recognize this potential issue now, as ramping up saving and investing now could severely curtail or even wholly prevent your retirement from being limited to just what SS checks will provide for.

Indeed, time is an incredible ally to the investor, if one puts time on their side as soon as possible.

Albert Einstein once remarked, “Compound interest is the eighth wonder of the world. He who understands it, earns it; he who doesn’t, pays it.

Well, compound interest requires time to really work for you, which is why you want to start saving and investing now.

What’s really amazing about compounding, though, is that even just a little bit of it can start to work wonders. However, it just becomes more powerful as time goes on.

My experience bears this out.

I was completely broke just a few years ago. Actually, I was below broke, as my liabilities outstripped my assets.

I started saving and investing in early 2010, at 27 years old.

And yet the passive and growing dividend income my real-life personal stock portfolio generates for me started covering the majority of my core personal expenses just six years later, at age 33.

Indeed, that portfolio generates five-figure passive income on my behalf. And I’m still just in my mid-30s, which means this portfolio should greatly supplement my own Social Security income 30 or so years down the road (while compounding continues to work).

I covered how I did this via my “blueprint” for early retirement, which makes it fairly straightforward for anyone to understand and perhaps follow a similar path.

You can see this wasn’t a particularly long period of time.

But I had to aggressively save and invest in order to get here.

That means cutting out every single expense that wasn’t practically essential to survival and everyday life.

All of the “fluff” went out the window.

Think cable TV, restaurant visits, and even my car.

Once I had my ability to save locked in, I focused on putting my capital to work as intelligently as possible.

After an incredible amount of research on investing, I settled on the dividend growth investing strategy to get me to where I want to be.

And this strategy could work perfectly for your situation.

That strategy basically involves buying and holding shares in high-quality businesses that routinely generate higher profit, then share that increased profit with shareholders in the form of dividends.

Meanwhile, since profit is growing, those dividends are also growing.

That’s the growth in dividend growth investing.

Because what’s better than passive income?

Growing passive income, of course!

After all, a shareholder is simply a part-owner of a publicly traded company.

Well, as a part-owner, should you not expect your rightful and direct share of any profit the company generates?

The thing is, many high-quality dividend growth stocks are household names.

These tend to be blue-chip stocks that make great investments even if you were to factor out the growing dividends. Said another way, they’re simply well-run companies. As such, they have the wherewithal to pay those growing dividends.

Think companies like Procter & Gamble Co. (PG), The Coca-Cola Co. (KO), and Microsoft Corporation (MSFT).

In fact, you can find more than 800 dividend growth stocks by checking out David Fish’s Dividend Champions, Contenders, and Challengers list.

Great companies become great by selling ever-more products and/or services, meaning they increase their profit, which translates into a more valuable company.

Well, that would also translate into increased wealth for you as your shares become worth more.

Perhaps more importantly, the increasing profit funds those increasing dividends, translating into increased passive income for you as the companies grow their dividend payments.

And you could, and probably should, just sit on those shares, never selling them, instead just collecting (and reinvesting) that growing dividend income.

That’s precisely where you want to be in retirement – letting great companies work for you, sending you checks for their hard effort.

It’s a wonderful situation to be in.

Now, how aggressively you want to supplement your own Social Security will depend on many factors, including how much passive income you already have, how much passive income you’ll want, what you believe your SS income will be, your expenses both now and in the future, and at what age you’ll start to collect SS income.

Regardless, compounding is something you want to get working in your favor as soon as possible.

But before you start putting capital to work, fellow contributor Dave Van Knapp’s series of lessons on dividend growth investing is an excellent read.

The series deftly explains the entire dividend growth investing strategy from start to finish, and it’s almost necessary reading for those new to the strategy or new to investing in general.

Once you feel comfortable with putting your capital to work, it’s worthwhile to keep in mind that I share actionable long-term dividend growth investing ideas every Sunday, as part of my series of undervalued dividend growth stocks.

You can absolutely supplement your Social Security income. And it might not even take that long to make a huge impact on your entire retirement, as my real-life experience shows.

Tim, you want to be the one who earns compound interest. You don’t want to be the one who pays it.

But in order to put yourself in that advantageous position and get compounding working for you, you should start saving and investing today.

Time is your ally. Let it do what it does best.

I wish you luck and success.

Jason Fieber

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Disclaimer: Jason Fieber is not a licensed financial advisor, tax professional, or stock broker. Please consult with a licensed investment professional before investing any of your money. If your money is not FDIC insured, it may decline in value. To protect the privacy of our readers, any names published in this article are under aliases. In addition, text may be edited, omitted or paraphrased for grammar or length.