Folks who are approaching retirement age often worry about whether or not they have adequately saved enough cash over the course of their working years to ensure all of their expenses are taken care of after they leave the work force. A survey that was conducted back in 2023 by the Nationwide Retirement Institute, discovered a whopping 75 percent of those who are 50-years-old and over are putting in serious worry time over the idea that Social Security benefits running out during their lives. And as the Motley Fool reveals, even if you aren’t worried about that, you are probably still concerned about whether or not you have the money available to have the kind of retirement you’ve been dreaming of.
The Fool reveals that one way you can tackle those worries head on is by learning how to invest for the long-term and making preparations for retirement in advance. You can do that by buying stock and relying on investments that generate an income while you’re in your retirement years. This will place you in a much stronger financial position than you would have been. The latest article for The MF reveals how you can go about generating $50,000 in annual dividend income by the time you’re ready to call it a day in the work force.
An ideal way to simplify your investing strategy and to help generate strong returns is to invest in an exchange-traded fund (ETF). By putting money every week or every month into an ETF, you don’t have to worry about which stocks are good buys at the moment you decide to invest; you can simply put money into the same diversified ETF to eliminate the guesswork and analysis that can sometimes turn investors off from investing in stocks.
And there are many excellent ETFs to choose from. A popular one is the Invesco QQQ Trust (QQQ -1.59%). It holds the top 100 nonfinancial stocks in the Nasdaq, which means you’ll have exposure to some of the best growth stocks in the world. Whether you want to invest in Microsoft, Amazon, Nvidia, or even Costco Wholesale, those stocks are all within this fund. And as new growth stocks arise and there are new top names, the ETF will update and reflect the best of the best; there’s no need to constantly monitor stocks and valuations.
The Invesco QQQ Trust has made for an exceptional investment over the years. During the past decade, the fund has grown by more than 415%, which averages out to a compounded annual growth rate of 17.8%. That doesn’t mean every year you’ll achieve that type of return, but with some excellent growth stocks in the fund, you could outperform the S&P 500 index and its long-run yearly average return of 10%.
A lot of people think you have to have a huge amount of money to invest in stock up front, but that’s not true. In fact, you can invest early and often, which will help you build a huge balance. The Fool reveals that if you can save $50 a week, which is pretty dang hard in Biden’s economy, for over a year, that extra $50 a week adds up to $2,600 that you could then pour into the Invesco QQQ Trust.
Here’s how those savings could grow, assuming you averaged a 15% annual return on your investment and invested $50 per week:
Year Balance 1 $2,808.86 2 $6,071.58 3 $9,861.51 4 $14,263.82 5 $19,377.47 6 $25,317.41 7 $32,217.14 8 $40,231.75 9 $49,541.39 10 $60,355.32 11 $72,916.59 12 $87,507.56 13 $104,456.19 14 $124,143.43 15 $147,011.81 16 $173,575.33 17 $204,431.08 18 $240,272.61 19 $281,905.53 20 $330,265.64 21 $386,439.94 22 $451,691.08 23 $527,485.71 24 $615,527.50 25 $717,795.38 26 $836,588.05 27 $974,575.65 28 $1,134,859.75
“After 28 years, you could have a balance of well over $1.1 million. Of course, depending on the actual returns, your portfolio balance will undoubtedly vary. Assuming you retire at age 65, that would mean you’d want to start deploying this strategy by age 37. But if you start later in life, you can also make up for that by trying to invest a bit more each week. The conclusion, however, remains the same: Investing as much as you can as often as you can will put you in a better financial position by the time you retire,” The Fool explained in the article.
The report goes on to state that another good investment is growth stocks, particularly when your goal is to beef up the balance of your portfolio, however, these sort of investments do come with some risk, which might not make them the most optimal investments when you’re ready to retire. When you are actually in your retirement and you need something a bit safer to put your money into, it might be time to move your portfolio into a high yielding dividend fund.
A good option here is the SPDR Portfolio S&P 500 High Dividend ETF (SPYD -1.19%). It yields around 4.5% and holds a variety of different stocks, including Citigroup, Ford Motor, and Iron Mountain. This broader mix of stocks offers higher payouts and greater diversification than what you’ll get with the Invesco QQQ Trust. And if you’ve got a large portfolio totaling more than $1.1 million, your dividend income could come in around $50,000 per year. By then, there could be other dividend-focused ETFs to choose from. But with an above-average yield and some great diversification, you can put all the gains you accumulated over the years to work into a dividend-focused ETF to maximize your income during retirement.
Another good idea is to invest in ETFs, which can help you achieve your financial goals while also minimizing risk, which helps reduce stress, which then helps you live a longer, healthier, happier life, which then means you need more money, which then means you need to invest more, and on the cycle goes until it’s time to check out, if you get my drift.
The Motley Fool wrapped everything up by saying, “There are many other ETFs you could use for this strategy, but ultimately you can put yourself in the best position by targeting growth-oriented ETFs when you have a lot of investing years left, and putting that money into a dividend-focused ETF once you’re in retirement and need more stability. By doing this, you can make your retirement years much more enjoyable as you potentially rake in a lot of money from dividends.”