None of us have a crystal ball to predict what the future holds. As much as we prepare for our retirement, our kids moving out, and future travels, we have no freakin’ idea how anything will play out. We are at the whim of the universe.
So, how are we supposed to navigate this unknown future if we have no clue what will happen? We have to become rich. I know the word “rich” has a negative connotation, but we must get over that. Being rich means, we have excess income vs. expenses—that’s all.
One of the best ways to navigate retirement and life is by building a huge dividend portfolio. Dividends are the lighthouse during the choppy storm that is retirement. We can now focus on our dividend portfolios to ensure they grow to be the brightest lighthouse in the port.
Retire Early as a Well-Rounded Millionaire
How are dividends useful during retirement? Hopefully, we all will have some kind of fixed income throughout retirement. These fixed income sources could be a pension, social security, 401k distributions, Roth IRA distributions, etc. These will not be enough.
Fixed income is a great base for our long-term retirement planning because we can count on it to pay our monthly expenses. But what other things will pop up during retirement?
Do we need to put the car in the shop? How about treating our spouse to an anniversary dinner? What if the grandkids come into town? Do we need cash to treat them? There are so many things that we want to do, but where does this money come from?
We need immediate income. We need income that we have available and ready for random events throughout retirement. Even better, if we don’t need our income, we can reinvest it back into our portfolio and ensure it will be even bigger next month.
Dividends give us the flexibility to live our life the way we want. I can adjust my portfolio to meet my needs on the fly. If I am sitting on a large sum of capital gains with my index fund, I can sell them and invest that cash into a closed-end fund to get maximum dividend yield.
If I want to invest my dividends from my closed-end fund into index funds to maximize growth, I can do that. There is no limit to what I can do with my dividends, even if I am already retired.
6 Types of Income Streams
I have already discussed how a dividend portfolio can give us ultimate flexibility versus an annuity. Now, we can see the big picture that dividends can be a large part of our overall retirement planning.
This month, I received dividends from PCI ($50), NVG ($12), and AT&T ($31), among others. I reinvested the dividends from PCI and NVG and took my wife to sushi with AT&T cash. That is a small example of the magic of dividends.
Now, imagine we multiply those numbers all by ten—PCI ($500), NVG ($120), and AT&T ($310). Do you see where I am going with this? Once you add in rents and royalties, you can see how powerful your retirement planning can become leveraging passive income.
How do we get started building our dividend lighthouse? The hardest part of creating a dividend portfolio is learning to trust the stock market and the companies it contains. I wrote a guide to start the trust process titled “The Woman’s Guide to Investing.” Yes, men can read it too.
How We Plan to Retire on Dividends
The first step is learning terms like dividend yield, profit and earnings, and federal funds rate. Make a daily habit of reading a stock market website like Seeking Alpha. Find your favorite author (here’s mine) and read their works. Read the comments as well. Dividends, and the stock market, have to become part of your life.
Every passive income source you build will require some kind of grind, and dividends are no different. But what you get in return is a powerful tool that you can shape to fit your daily needs.
Now that I am 40 years old and a landlord, I have seen many people who depend on one income source through retirement. They get one check a month and pray that nothing bad happens to ruin their plans. They live a life of scarcity.
The opposite of scarcity is abundance. We should always feel that money is coming to us and we have more than enough to satisfy our needs. Part of this feeling is defeating toxic consumerism and living a small, peaceful existence.
The other part is building a colossal lighthouse to rescue you from any situation that may arise. My goal is to earn $6,000/month in dividends. That is $1.8 million in our dividend portfolio. There is no doubt that we will achieve this, but we will keep going once we do.
High-Yield Hijinks
Why keep going? Because dividend investing is a part of who we are now. We pay ourselves first by investing; then, we live off the income that our investments pay us. It is a simple tweak to our regular spending habits that allows us to build our portfolio continually.
If you are interested in becoming a dividend investor, I have many tools available to you.
- Stock Market Investing 101 series
- Investing for Dividends series
- Preferred Shares series
- Intro to REIT series
- How to Start Dividend Investing series
- Become a Bonafide Investor series
Retirement shouldn’t be a turbulent sea of sadness, regret, and frustration. We should always see our lighthouse, allowing us to avoid the storm and the drama calmly. It is incumbent on us to build our lighthouse well before retirement age.
Dividends are one of the most important pillars of our retirement planning, and we need to treat them as such. Start learning what they are and how to build them. You will not regret your decision when a storm hits. Enjoy and Happy Investing!
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Disclosure: I am not a financial advisor or money manager, and any knowledge is given as guidance and not direct actionable investment advice. I am an Amazon Affiliate. Please research any investment vehicles that are being considered. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.
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