Stock Market Investing in Your 50s: It’s Time to Take Control of Our Finances

Our 50s allow us to finalize any loose ends as we prepare for retirement. Although there will be many bumps along the way, income will enable us to live our dream retirement.

We wrestle the horns of the bull during our 50s. This decade is a “Do or Die” time for our finances. We must learn, adjust, budget, and excel at our financial mission to retire with more income than expenses.

Welcome back to the Stock Market Investing At Any Age Series (20s, 30s, 40s), where we take control of our finances and become our best selves.

CDs vs. Bonds

What does taking control look like? Taking control of your finances means having the ability to deal with any circumstance that arises, either with cash flow or from emergency funds.

Taking control means that you have excess income to expenses. You understand that your true discretionary income is excess dividend income from stocks.

Let’s examine how a couple in their 50s can control their finances. Josh and Kristina earn $6,000/month in dividends, while their budget is $5,000/month.

They reinvest $500/month back into their portfolio, leaving them $500/month in discretionary income. That’s a basic overview of how we should all run our households. Let’s explore this further.

1. They kept their expenses low at $5,000/month.
2. They earn more dividends than their expenses.
3. They reinvest $500/month into the portfolio to ensure it outpaces inflation.
4. They use the remaining income for discretionary purposes.

How did Josh and Kristina arrive at this point? First, they determined their bare-bones budget and continued to stick to it. Budgeting is the most challenging part of any financial plan.

My First Day of Retirement

Income investing for everyone. Second, Josh and Kristina became income investors. Income investing is the best thing you can do for your retirement planning.

Income investing encourages everyone to exchange their cash flow for current income from the stock market; it’s not growth or speculation.

Let’s say you have $10,000 from an amazing tax return that you want to invest. Let’s review how the different allocations would convert this money into a return on your investment.

1. Speculation- You put $10,000 into Bitcoin ETFs that yield 0%. In ten years, you may have $100,000 or zero dollars—that’s how speculation works.
2. Growth- You place $10,000 into the Nasdaq 100 (QQQ) index fund. In ten years, you have $25,000 in your account.
3. Dividend Growth- You invest $10,000 into McDonald’s (MCD). In ten years, you have $18,000 in your account, plus it pays you $1,440/year in dividends.
4. Income Investing- You invest $10,000 into Pimco Dynamic Fund (PDI) at 12%. Today, you receive $1,200/year in dividends. In ten years, you will have received $12,000 in dividends.

As you can see, you receive your money today with income investing, which we call current income. Over ten years, you have $12,000 in dividends to reinvest, spend, or save.

Retirement & Dividends: Enjoy Your Time Off

Josh and Kristina earned $6,000/month in dividends through income investing. They would have needed to invest $720,000 at a 10% yield to earn this much. However, this is very achievable with determination and dedication.

In your 50s, your income investing allocation should match your age. Therefore, it should be between 50-59% of your portfolio. This percentage will give you a hefty amount of income to play with. But wait, there’s more.

Speculation and growth allocations. In your 50s, you should allocate no more than 5% of your portfolio to speculation. This will give you ample opportunity to catch a wave from a new stock or crypto without breaking the bank.

You also need growth from index funds. Index funds help balance out your portfolio from the ups and downs of income investing. 

Final Freedom Road Trip #4: Creative Writing

Index funds grow because the underlying companies continue to innovate and change. You must also capture this growth, or you risk underperforming inflation.

We don’t plan to sell shares of our index funds ever, but we can still use leverage to extract resources from them. What does leverage mean?

Let’s say I had $200,000 in index funds in my M1 Finance brokerage account. Instead of selling $15,000 in index funds to purchase a new car, I can borrow the $15,000 against my portfolio.

Leverage allows my index funds to continue growing while I use dividend cash flow to repay the loan. This is how rich people like Elon Musk use the stock market to their advantage.

You don’t have to pay taxes on capital gains when you use leverage. Therefore, the interest you pay may be less than the taxes you pay from selling shares.

Ultimately, index funds make our portfolio bigger and grander, while income investing pays the bills. You’ll need both going into retirement.

Financial Freedom Road Trip #3: Rental Income

Stepping down on dividend growth. As we allocate more and more to income investing, we begin to step down our dividend growth investing allocation.

We don’t need to sell shares of our DGI stocks, we only need to allocate future cash flows to new areas of our portfolio.

Dividend growth investing takes 20 to 30 years to realize its potential. At this point in our lives, we need current income much more than future income.

For example, Google (GOOG) and Facebook (META) have initiated low-yield dividends of under 1%. Since I am 43, I can wait 30 years for these stocks to become great dividend aristocrats.

If I was 56, I would need PIMCO Dynamic Fund (PDI) at 12%, much more than Google (GOOG) at 1%. Therefore, I can put a little into GOOG and the majority into PDI. That’s how to maximize your income while respecting the future.

Financial Freedom Road Trip #2: Options Trading

Putting it all together. Let’s say Josh and Kristina are 55 years old; their income investing portfolio would be 55% of their account.

The remaining allocations are speculation (5%), index funds (30%), and dividend growth (10%). The majority of their income would come from income-investing products like closed-end funds and business development companies.

Your 50s present you with a decade to iron out your retirement budget. Many people have already retired in their 50s, so they are living their dream lives.

You will not retire without a hardcore budget. You must know every penny that comes in and out; that’s the only way to win with money.

Conclusion. If you consistently invest in income-investing products, your passive income from dividends will eventually exceed your budgetary needs. When this happens, you are financially free.

Not to mention that you should have additional income from social security, pension, annuities, or 401 (k)s. Consider this cash flow a luxury that is secondary to dividends from the stock market.

Financial Freedom Road Trip #1: Dividend Investing

My wife and I retired in 2023, at ages 39 and 42, respectively. I served 24 “fun” years in the US Marine Corps, which helped us fund our retirement.

My goal is to increase my dividend income to the point that it exceeds my pension cash flow. This is a lofty dream, but one I want to achieve.

You have the power to fund your retirement without any help from the government or a corporation. You do this through income investing.

Of all the things that changed my life, income investing was the second most dramatic—after getting married. Every day, I wake up with more income to reinvest and convert into more income. This is how God intended us to treat our money. Good Luck!

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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. All Right Reserved Military Family Investing