Remember when $1 million was a target goal on which to retire? Today, even that may not enough – especially for Baby Boomers getting ready to retire – and the situation is even worse for Gen Xers and Millennials.
The amount you’ll need in retirement depends on a number of factors such as:
How long you live
Where you live
According to the Social Security Administration, about one in 10 adults will live past age 95. That’s a problem for most investors. Few retirement plans account for such a long lifespan, which could be more than 30 years.
GOBankingRates conducted a survey to determine how long a $1 million retirement fund would last in each of the 50 U.S. states. The research considered items such as groceries, housing, utilities, transportation and healthcare purchased by individuals aged 65 and older. In the costliest state, Hawaii, $1 million would not last even 12 years into retirement. In Colorado, $1 million would last 22 years due to lower expense costs (except healthcare and housing). To stretch your dollars the furthest, Mississippi is the state where $1 million would last 26 years, 4 months.
When considering your retirement fund needs, don’t neglect to consider the effects of inflation. With the U.S. long-term inflation rate averaging about three percent, this means the purchasing power of your money decreases by about three percent every year. It’s like losing approximately half your money over a 24-year period.
According to Investopedia, “if you are 65 with $1 million in savings, you can expect your portfolio of properly diversified investments to provide $40,000 per year (in today’s dollars) until you are 95. Add that to your Social Security income, and you should be bringing in roughly $70,000 a year.” Inflation should also be factored in since this annual income will provide less purchasing power over time. Will this be enough to sustain your lifestyle?
If your answer is no, you might consider an investment strategy that’s been around since the start of the market. It accounts for nearly 60% of the total market return for the last 90 years*, but usually flies under the radar of the typical investor. Think dividends.
Dividend Growth Strategy
When planning for income during retirement, you want to ensure that a portion of your income is growing. The goal of our dividend growth strategy allows your money to continue to grow over time, even as you collect income. You can’t spend appreciation, but you can spend income.
In our opinion, investing in American companies that have growing income with growing dividends has historically been one of the best solutions to hedge against inflation and loss of purchasing power. Your retirement plan should be able to provide and support for you and your family for as long as you need it to, regardless of age. Our dividend growth strategy aims to do exactly that.
The payment of dividends is not guaranteed. Companies may reduce or eliminate the payment of dividends at any given time. There is no assurance that the techniques and strategies discussed are suitable for all investors or will yield positive outcomes. The purchase of certain securities may be required to effect some of the strategies. Investing involves risks including possible loss of principal. Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. Past performance is no guarantee of future results.
A few weeks ago I attended the retirement party of someone I’ve called a dear friend for over 49 years. Long ago, we were both young financial advisors chasing similar career paths. We even migrated to independent businesses around the same time. His retirement prompted me to reflect with gratitude on all my opportunities and […]