Dividend Investing To Generate Passive Income for Life

It’s a stone cold fact that we can no longer rely on the powers that be to take care of us during our retirement years. The Social Security Administration is almost tapped out and company loyalty to their employees is at an all-time low. So how are you supposed to retire? Well, unfortunately, most of us will never be able to retire. Why? Because the majority of Americans are living month to month and haven’t saved a dime for their retirement. Yes, that means that over 70% of people that are planning to retire cannot. Moreover, what happens if you get sick and cannot work anymore? Do you think you honestly can qualify for Social Security Disability? The requirements have gotten stricter. So what can we do to generate passive income for life? We can invest in dividends.

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What is a dividend?

Well, a dividend is a reward from a percentage of a companies earnings to you the investor for owning the company’s shares. They are decided by the company’s board of directors and voted in from you the shareholder. However, not all companies offer dividends and not all dividends are issued as cash payments, but cash payments are the most common. The companies that offer dividends are usually long-standing corporations, mutual funds, and exchange-traded funds. So the stocks you purchase today need to be dividend yielding, cash payments, and long-term investments. This is not a day-trading stock purchase. It must be a long-term investment that you will be holding onto for a very long time.

How do you invest in dividend stocks?

Firstly, you need to assess your retirement goals. You need to ask some tough questions. What is your age now? At what age do you wish to retire? How much money do you need to live on without selling your shares? The answers are specifically tailored to you, the individual. Secondly, you need to assess how much you need to save on a monthly basis and for how long you need to save it. This gets very tricky and, frankly, a lot of people are afraid of the answer.

Let’s take my friend Katie for an example. She is 52, a widow, and has two school-age children. Moreover, she is self-employed and has an individual IRA and Money Market account with a high yielding online bank. She wants to be able to retire at 60 and generate an income of $100,000.00 a year for the rest of her life. She contributes $6,500.00 a year to her IRA and saves 15% of her total yearly income to her money market account ($15,000.00). She is saving a total of $21,000.00 a year which comes out to $1,792.00 a month. In 8 years, her total investments will be worth $806,406.

But is that enough for her to live off of for the rest of her life? No, she needs to save more and plan out her total savings. Thus, if she wants to retire in 8 years and live off of $5,000.00 a month, she needs to save $3,124.00 a month and have $1,242,400.00 in her investment account when she retires. What an eye-opener, right? Do you think that most people have any idea how much they need to save for their retirement?

So the endgame of investing in dividend stocks is to create passive income and ensure your continued financial stability for your retirement. I don’t know about you, but I do not want to be working into my golden years nor do I want to depend on the government for my financial stability. By investing in stocks that yield a steady dividend, you are securing your family and lifestyle from the volatility of the government and current workplace uncertainty. I found by taking personal responsibility for my own financial health, I no longer have to worry about retirement and the lifestyle I wish to live. This only works if we buy and hold dividend yielding stocks that pay out in cash. This is a long-term solution and if we start saving now, we will be able to generate passive income for as long as we live.

FG Editorial Team
The Founder's Guide Team - Asian Associates with dynamic elements out to make a change.Thank you for visiting our site! If you do have any questions or inquiry, feel free to contact us through our links and please don't forget to follow our social media accounts. It would be our pleasure to help you in any way we can. Always Remember: "Proceed to Succeed". Hoping to hear from you soon!

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