Dear DTA,
My goal is to “survive” retirement. I have been retired for over a year. I have only a very small nest egg that will not keep me at a comfortable lifestyle level. My goal is to make my money work for me.
-Jennifer D.
Hi, Jennifer.
Thanks so much for writing in. And thank you for your readership.
We have a passion for the content we put out, which is designed to help people just like you take control of their finances and better their financial positions in life. We want to help, inspire, and motivate people.
First, congrats for making it to retirement at all.
You might not know this, but plenty of Americans out there are struggling just to get to that point.
Many are working well past a traditional retirement age in order to make ends meet.
That said, your concerns are relevant and important.
Not everyone will approach your situation the same.
10 different financial experts might give 10 different answers.
However, consider that when I answer your question, my information is coming from a guy who retired from his day job at 32 years old.
Not many financial “experts” can lay claim to that.
So keep this in mind: the lifestyle I’m living and investment strategy I’m going to divulge is designed to “bulletproof” a retirement for decades.
Keep in mind, too, that things have been great thus far.
I quit my job, at 32, in early 2014. That was almost four years ago.
I then became financially independent at 33 years old, whereby my passive income started to cover my basic personal expenses in life.
I share all the details in my Early Retirement Blueprint.
In short, I don’t need a job any longer.
And check this out: I’m doing even better today than I was when I hit these milestones.
How so?
The secret is dividend growth investing.
This investment strategy involves buying shares in high-quality, world-class, wonderful businesses that share a portion of their growing profit with their shareholders, via growing dividend payments.
Growing dividends can be an excellent source of passive income, which can heavily fortify a retirement.
I can show you what this looks like in action.
My real-life and real-money dividend growth stock portfolio, which I call my FIRE Fund, is chock-full of high-quality dividend growth stocks.
This portfolio is generating the five-figure and growing passive income I need to cover my basic personal expenses in life.
I built that portfolio one stock at a time, by living below my means and investing my excess capital into dividend growth stocks like you (or anyone else) can find on David Fish’s Dividend Champions, Contenders, and Challengers list – a compilation of more than 800 US-listed stocks that have raised their dividends each year for at least the last five consecutive years.
Now, you may no longer be working. You might no longer be generating a massive income that can build a fairly large portfolio in a relative short period of time.
But that doesn’t mean that the nest egg you already have can’t be invested in high-quality dividend growth stocks, which would involve building out a portfolio (slowly but surely) of some of the best businesses in the world, generating a reliable and an increasing source of passive income that can solidify and sustain your retirement plans and lifestyle objectives.
Stocks outperform just about every other asset class out there over the long haul.
And then when you drill down into stocks themselves, numerous pieces of research have shown that dividend payers and growers (which are dividend growth stocks) outperform the broader market itself over the long run.
This shouldn’t be a surprise.
After all, a company that’s strong enough to regularly produce the growing profit necessary to reliably pay out increasing dividends has to be an incredible business.
Incredible businesses should perform much better, as investments, than poorer businesses over a long period of time.
As such, a lengthy track record of growing dividends serves as a pretty good initial litmus test of business quality.
Don’t believe me?
Well, I’ll rattle off a few dividend growth stocks for you.
Johnson & Johnson (JNJ). PepsiCo, Inc. (PEP). Microsoft Corp. (MSFT). Procter & Gamble Co. (PG). Exxon Mobil Corp. (XOM).
These companies have all increased their dividends for years on end. Some have done so for many decades.
They’re dividend growth stocks. But they’re also blue-chip stocks. They’re companies that literally make the world go round.
And there’s no reason you, Jennifer, can’t personally profit from that and collect the growing passive income you need to keep your lifestyle in place.
That growing passive income, by the way, is incredible not only because it could be funded by some of the best companies on the planet, but also because it’s growing at a rate that typically exceeds US inflation, increasing your purchasing power (and possible lifestyle) in the process.
You say you want your money to work for you.
Well, when old money is making new money, when companies are handing out dividend increases and increasing your passive income without you lifting a finger, that’s your money going to work for you.
But it’s ultimately up to you to invest your money in a way that you feel is best for you.
However, if/when you’re ready to put that capital to work with high-quality dividend growth stocks, it would be extremely worthwhile to read through fellow contributor Dave Van Knapp’s series of “lessons” on dividend growth investing.
These articles collectively discuss the dividend growth investment strategy with detail, going over what it is, why it works so well, and how to take advantage of it.
But that’s not it…
I personally highlight, every Sunday, a high-quality dividend growth stock that appears to be a compelling long-term investment, based on fundamentals, competitive advantages, and valuation.
You can see a new idea every Sunday through the Undervalued Dividend Growth Stock of the Week series.
So we’re giving you a lot of resources and ideas to work with, Jennifer.
There’s no time like today to start reinforcing your retirement and lifestyle.
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.