Retirement Can Go Two Ways From Here…

Marc Lichtenfeld By Marc Lichtenfeld
Chief Income Strategist, The Oxford Club

Dividend Investing

Editor’s Note: It’s yet another big week at Wealthy Retirement. Chief Income Strategist Marc Lichtenfeld has a new edition of Get Rich With Dividends available. (Click here to order your copy.) And starting today, we’re increasing the number of times you’ll receive Wealthy Retirement in your email inbox to five days a week – Monday through Friday.

Why are we making the change? Because subscribers like you deserve all of the best strategies and advice for making enough money to live to and through retirement, while avoiding all of the pitfalls. Going forward, please keep an eye on your inbox throughout the week.

To kick off the new schedule, see below as Marc explains how to generate so much investment capital in retirement, you may never lose your buying power.

-Andrew Snyder, Editorial Director

­­­­­­­­­­­­­­­I encourage everyone to save and invest as much as they can, but finding extra dollars is tough these days.

Saving isn’t just about creating a big pool of money. It’s also about ensuring our investments can provide the lifestyle we desire.

That can mean different things. For example, if someone wants to spend $75,000 per year in retirement for 20 years, they could decide they need $1.5 million and draw down that $75,000 each year. That’s not a great plan, though because that person could live more than 20 years and then they’d be broke.

However, I approach it a different way. I assume that if I need $75,000 this year, I’m going to need about 5% more each year. Life gets more expensive as the years go on, particularly healthcare costs. So the person in the above example drawing down $75,000 a year is going to have a very different lifestyle in year 20 then they will in year one.

My goal is to have enough investment capital that I never need to touch it – that it generates enough income each year to pay my expenses and just as importantly, spins off more income each year.

That’s not an easy thing to accomplish.

Let’s look at a chart, assuming a $1.5 million nest egg that generates 5% income per year. The investor needs $75,000 in year one and 5% more each year to keep up with rising costs.

perpetual-dividend-raisers-retirement-two-ways-from-here chart 1

In Retirement Scenario #1, because prices are going up each year and the return is staying the same, the investor has to use the investment capital to fund his or her lifestyle. Using that capital means there will be even less income each year because that money is being spent instead of generating income.

After 22 years, the entire $1.5 million is gone.

Scary stuff.

But there is a way you can solve this problem. Invest in Perpetual Dividend Raisers – stocks that raise the dividend every year. When you do, you need less starting capital to fund your retirement. It will generate more income in retirement and you will have a larger nest egg than when you started.

Here’s what I mean. For five years before retirement you invest in a portfolio of Perpetual Dividend Raisers with a starting yield of 4% and that raise the dividend by 10% per year. You reinvest the dividends.

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After five years, you have a nest egg of $875,000, only 58% of what you started with in the first example. Then, just your luck, as you begin your retirement the dividend growth slows down to 8% from 10%.

For the first 12 years, you need to dip into your capital in order to fund the retirement. But unlike our first example, your income is rising every year and eventually it increases so much that it starts generating more than you need. This allows you to replenish the nest egg – just a little at first, but by year 20, you’re adding $100,000 a year to your capital, which is used to generate even more cash.

If you only take out the income you need, at the end of 22 years, you have $1.2 million. In our first example, after 22 years you’re broke.

perpetual-dividend-raisers-retirement-two-ways-from-here chart 2

Look at how your income takes off towards the end. And you may need that money because for many people, their healthcare costs go through the roof in their last few years.

So you can see that you can live the retirement you want and start with nearly half the money you might otherwise need, if you do it the right way – by investing in stocks that raise the dividend every year.

If you want to learn more about this strategy and my proprietary 10-11-12 System for generating double-digit yields and annual returns over the long term, check out the second edition of my book, Get Rich with Dividends, which was just released last week.

You’ll learn everything you need to know for investing in Perpetual Dividend Raisers and ensuring that you’ll have more income every year than the year before. And best of all it’s a conservative strategy.

Order your copy today and get 40% off.

Good investing,