E Reasons To Invest In Dividend Payers For Retirement

When investing for retirement when one is younger, it makes sense not only to take more risk in the stock market, but to invest more in growth stocks rather than value stocks that pay a higher dividend. Over time, riskier growth stocks generally have higher returns due to the fact that they are indeed riskier. It makes sense to take more risk when younger because you have a lot of time to make up for any losses. The longer the time horizon, the more risk one can take.

But as we get older, we should be taking less risk because most of us will need the money for retirement expenses. Many of us will also need income, which means dividend paying stocks have a more prominent role in our portfolios.

Let’s go through some reasons why most of us should be looking at sold dividend paying stocks in retirement.

Income To Cover Expenses

If a person in retirement has enough income to cover expenses, then the ups and downs of the market don’t impact him or her nearly as much as somebody who is dipping into their principal. Although dividends are not 100% guaranteed, they are certainly less volatile than stock prices. So it makes sense to lower the volatility of one’s retirement portfolio by making sure a significant portion of that portfolio is in solid dividend paying stocks.

This is also about being able to sleep at night. How many people lose sleep because of volatility in the stock market? But if you have dividend checks that continue to roll in, you know you are secure if your retirement income covers your retirement expenses. This makes for less stress overall and the ability to power through tough times in the financial markets.

Income Growth To At Least Keep Up With Inflation

If inflation is running at 2.5%, prices will have gone up by 50% in just 16 years. If your retirement income has not grown at all during this time, this means your expenses relative to your income have also gone up by 50%. This would be a huge hit to most people’s retirement plans.

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Alpha Stockman 1 year ago Member's comment

Good read.

William K. 1 year ago Member's comment

Dividend producing stocks would help to offset inflation except that some idiots are working very hard to cause serious inflation eight now. And that excess money flying around will certainly bid up the prices of what I need to buy. Certainly something is wrong in this picture.