Best Stocks To Invest In For Retirement

Date:

What Are The Risks Of Dividend Stocks

Invest for Retirement The Best Way

Given all the advantages of high-dividend stocks, does it makes sense to invest your entire portfolio in them? After all, they provide income like interest-bearing investments and offer the potential for capital appreciation over the long-term, similar to other stocks.

As good as all that seems, high-dividend stocks do have certain risks:

Why You Can Trust Bankrate

Founded in 1976, Bankrate has a long track record of helping people make smart financial choices. Weve maintained this reputation for over four decades by demystifying the financial decision-making process and giving people confidence in which actions to take next.

Bankrate follows a strict editorial policy, so you can trust that were putting your interests first. All of our content is authored by highly qualified professionals and edited by subject matter experts, who ensure everything we publish is objective, accurate and trustworthy.

Our investing reporters and editors focus on the points consumers care about most how to get started, the best brokers, types of investment accounts, how to choose investments and more so you can feel confident when investing your money.

Investing disclosure:

The investment information provided in this table is for informational and general educational purposes only and should not be construed as investment or financial advice. Bankrate does not offer advisory or brokerage services, nor does it provide individualized recommendations or personalized investment advice. Investment decisions should be based on an evaluation of your own personal financial situation, needs, risk tolerance and investment objectives. Investing involves risk including the potential loss of principal.

How Do I Invest Around My Retirement

Regarding retirement planning, one of the most important questions is how to invest your money. After all, you dont want to lose any of your hard-earned savings, but you also want to make sure you have enough income to cover your costs in retirement. So whats the best strategy?

There is no single answer that will work for everyone, but in general, its a good idea to focus on low-risk, safe investments that will give you a steady income stream. That way, even if the stock market takes a dip, you wont have to worry about losing money.

One popular option for retirement income is annuities. These contracts with an insurance company guarantee a certain amount of income for life. Another option is to invest in bonds, which offer fixed interest payments and can be a relatively safe way to grow your money.

Of course, every investors situation is different, so its important to talk to a financial advisor about the best way to invest around retirement. But by focusing on safety and income, you can help ensure that your golden years are as bright as they can be.

Read Also: How Much Will My Pension Be When I Retire

Where Can I Put My Money Instead Of A Bank

Its important to remember that bank accounts can not keep up with inflation, thus losing purchasing power. This is because banks offer a fixed interest rate on savings, which does not grow along with the cost of living. Inflation can significantly impact purchasing power, and over time, it can erode the value of savings.

To keep up with inflation, investors typically purchase assets that offer the potential for growth, such as stocks or real estate. However, these investments also come with risks, including loss of principal.

A fixed index annuity may be a good option for investors seeking to preserve purchasing power with minimal risk. This type of annuity offers protection from loss of principal and provides the potential for growth based on the performance of an underlying index, such as the S& P 500.

Johnson & Johnson And Alphabet According To The Seeking Alpha Authors Rating And Wall Street Analysts Rating

These are the 15 best dividend stocks for investing in retirement ...

While Johnson & Johnson receives a hold rating according to the Seeking Alpha Quant Rating, Alphabet gets a strong buy. According to the Seeking Alpha Authors Rating, Johnson & Johnson is currently a hold and Alphabet is a buy. Taking into account the Wall Street Analysts Rating, Johnson & Johnson receives a buy and Alphabet a strong buy.

Recommended Reading: How To Get Entirely Tax Free Retirement Income

Resist The Urge To React To Short

2:19

Hi Im Judith Ward, vice president and thought leadership director at T. Rowe Price.

Coming into 2022, we were cautious about the markets prospects. And so far in 2022, security markets have been highly volatile.

But our research suggests that even if investment returns are lower in the near future, you dont need to change course if you are saving appropriately for retirement. However, workers over 50 might benefit from saving more.

The good news is, we found that a large majority of workers participating in their workplace 401 plans are not reacting to market events by changing their investments.

And, the amount theyre contributing to their 401 plans has remained relatively stable.

There are a number of things you can do to cope with expected lower returns and market volatility. First, build up an emergency fund to help prevent needing to liquidate your investments for emergencies or tap in to your retirement accounts when markets are fluctuating.

Second, maintain an age-appropriate asset allocation. Younger investors, for example, should have higher allocation to stocks and increase the allocation to bonds over time as retirement approaches.

Finally, if you are close to or in retirement, you should review your retirement spending plans. Our research suggests that a more conservative spending approach would have worked well for those who retired into bear markets in the past.

Should I Change My Asset Allocation

This could be a good time to talk with your financial adviser about your goals and to check whether your portfolio aligns with those objectives, experts say. That could result in an asset allocation shift if, for instance, you want to reduce your equity exposure to lower your risk or cut back on investments in certain sectors, like tech.

“For most investors, the best approach to long-term success is broad diversification that aligns with their risk tolerance,” Richardson said. “When you diversify your portfolio, you spread your money across different assets, understanding that all investments will go up and down at different times depending on different factors.”

People who are close to retirement or already retired may want to add Treasury Inflation-Protected Securities, or TIPS, to their portfolio, she added. Investors can buy TIPS directly through the Treasury Department, or via their bank or broker. But an investor can only buy $10,000 worth of TIPS annually for each account, which limits the amount of inflation protection they can offer.

“Commodities are also a good offset to inflation,” Richardson added.

Don’t Miss: Can I Retire On 600000

A Bulletproof Tech Company

Microsoft has vast competitive advantages and a breath and depth of products unmatched in the tech sector. It dominates the enterprise software industry, and its leading market share with products like Windows and its Office suite gives the company a competitive advantage when it comes to rolling out new products. If your business already uses Microsoft products, you’re much more likely to use new ones that come on the market, like choosing Microsoft Teams instead of Slack, for instance.

That competitive advantage is evident in the company’s results. In its most recent quarter, it had operating income of $20.5 billion, giving it an operating margin of nearly 40%.

Its business is also diversified in a way that rivals like Apple, Alphabet, and even Amazon are not. Though it’s best known as a software company, Microsoft is also a leader in cloud infrastructure, video gaming, and hardware like laptops and tablets. And it makes money through newly acquired businesses like Linkedin.

The company is also one of only two U.S. companies to receive a credit rating of AAA .

Its 1.1% dividend yield isn’t going to wow your typical income investor, but there’s a lot of growth ahead for that payout. Microsoft’s revenue rose 16% in currency-neutral terms in its most recent quarter, and its dividend payout has tripled over the last decade. It could easily do that again since its payout ratio is still modest at less than 30%.

Tips For Determining The Best Investments For Retirees

Top 5 Retirement Stocks To Invest In | Dividend Stocks 2022

Now that you know some of the safest investment options for seniors during retirement, how do you choose the right ones for you? Here are a few tips to consider:

  • Consider your goals: What are your financial goals for retirement? Do you need income to cover basic living expenses, or are you looking to grow your nest egg? Your goals will help guide your investment choices.
  • Consider your risk tolerance: How much risk are you willing to take with your investments? For example, if youre worried about losing money, you may want to focus on safe, conservative investments. On the other hand, if youre willing to take on more risk for the chance of higher returns, you may want to consider more aggressive investments.

Also Check: University Retirement Community Davis Costs

What Are Stocks And Should You Buy Them

Stocks represent tiny pieces of ownership in a company. So when you buy a companys stock, youre essentially becoming a part owner of that company.

The price of a stock is determined by supply and demand. If a bunch of people want to buy a stock and not many people want to sell , the price will go up. But when not many people want to buy a stock and lots of people want to sell , the price goes down.

Well spare you the demand curve graphs from Economics 101, but lets talk about pizza. Lets say Papa Daves Pizza Restaurant is selling pizza by the slice. Dave has a fresh cheese pizza with eight slices, but he has 20 hungry customers. Rather than setting a fixed price, he decides to have a pizza auction and let the customers place bids. As you can imagine, the limited supply and the excess demand will drive up the price per slice. In economic terms, Dave let the market determine the price. The stock market is like this on a much larger scale with millions of stocks changing hands each day.

With stocks, you make money one of two ways: when you sell your stock for more than you paid for it or you receive a dividend from the company .

So, should you buy stocks? Yes, stocks should definitely be part of your retirement portfolio . . . but you need to be smart about how your stocks are grouped and diversified.

Safe Stocks To Buy Near Retirement

10 Safe Stocks To Buy Near Retirement

As you approach retirement, you generally want to dial down the risk profile of your portfolio to protect your nest egg from unrecoverable losses. This doesnt mean you should eliminate all equities from your accounts as you cross over into retirement, however.

Looking To Diversify in a Bear Market? Consider These 6 Alternative Investments

Longer life expectancies mean that someone retiring at age 65 can expect to live 18 to 20 additional years on average, according to Statista. Meanwhile, the S& P 500 has never experienced a loss over any 20-year rolling period, so having a portion of your portfolio in dependable equities rather than speculative stocks can be a great way to make sure you dont outlive your retirement savings. Here are 10 safer stocks to get as you head toward retirement.

Don’t Miss: T Rowe Price Retirement 2030 Fund Class R

How We Make Money

The offers that appear on this site are from companies that compensate us. This compensation may impact how and where products appear on this site, including, for example, the order in which they may appear within the listing categories. But this compensation does not influence the information we publish, or the reviews that you see on this site. We do not include the universe of companies or financial offers that may be available to you.

Why Choose Individual Dividend Stocks

Wealthy Retirement

In the next section were going to discuss investing in top dividend stocks through exchange traded funds. There are certainly advantages to going the fund route, especially if simplicity is a major goal.

But the advantage of individual high-dividend stocks is that you can choose the companies that:

a. Have the most attractive dividend yields, andb. are companies that you feel have better long-term growth prospects.

You could also use individual high-dividend stocks as a way of increasing the returns on the fixed income portion of your portfolio.

Now strictly speaking, high-dividend stocks arent true fixed income equivalents. Unlike bonds, they dont guarantee return of your invested principal if held until maturity.

And unlike bank investments, particularly certificates of deposit, neither your principal nor your return is FDIC insured, and therefore not guaranteed.

But since high-dividend stocks are primarily income generating vehicles, allocating a small percentage of your fixed income portfolio to several of the highest yielding stocks can increase the yield on your income generating portfolio, without dramatically increasing risk.

And while it is true that high yield stocks, being stocks, can fall in a declining market, they can also provide capital appreciation in a rising market.

Thats something pure fixed income investments dont typically provide. Now let’s look at some criteria to help you select high-dividend stocks.

Don’t Miss: Will 1 Million Be Enough To Retire

Rethink Your 401 Allocations

Conventional financial wisdom says that you should invest more conservatively as you get older, putting a greater amount of money into bonds and less into stocks. The reason is that if your stocks take a tumble in a prolonged bear market, you wont have as many years for their prices to recover and you may be forced to sell at a loss.

Just how conservative you should become is a matter of personal preference, but few financial advisers would recommend selling all of your stock investments and moving entirely into bonds, regardless of your age. Stocks still provide growth potential and a hedge against inflation that bonds do not. The point is that you should remain diversified in both stocks and bonds, but in an age-appropriate manner.

A conservative portfolio, for example, might consist of 70% to 75% bonds, 15% to 20% stocks, and 5% to 15% in cash or cash equivalents, such as a money-market fund. A moderately conservative one might reduce the bond portion to 55% to 60% and boost the stock portion to 35% to 40%.

Best Retirement Stock #: Verizon Communications

This best dividend stock selection is from Eli Inkrot of Sure Dividend.

Verizon Communications is one of the largest wireless carriers in the country, with a network covering ~300 million people and ~98% of the U.S. The securitys dividend has also been covering the cash flow needs of retirees for some time.

Many might think of the business as a slow grower, but Verizon has shown some impressive results in recent years:

Source: Verizon Investor Day 2022

In the 2011 through 2021 period, Verizon has grown its earnings-per-share by 9.6% annually. However, over that same period, the dividend per share grew by a compound annual growth rate of just 2.5%, meaning the companys payout ratio declined substantially over this time frame. Today the dividend payment makes up less than half of earnings, allowing for an ample dividend yield, but it also allows the company to reinvest in its business, keep a strong balance sheet, and repurchase shares.

Moreover, while earnings and dividends have continued to climb, Verizons share price has languished. This makes todays value proposition more interesting.

In the Sure Analysis Research Database, we are forecasting the potential for 16.6% annualized total returns over the next five years. This is driven by the 5.8% starting yield, 4% expected growth rate and an 8.7% gain from the possibility of a valuation tailwind.

Disclosure: I am long VZ.

Read Also: Retirement Homes In Edmond Ok

There’s Still Time To Give Your Savings A Good Boost Before You Retire

If you’re between 55 and 64 years old, you still have time to boost your retirement savings. Whether you plan to retire early, late, or never ever, having an adequate amount of money saved can make all the difference, both financially and psychologically. Your focus should be on building outor catching up, if necessary.

Its never too early to start saving, of course, but the last decade or so before you reach retirement age can be especially crucial. By then youll probably have a pretty good idea of when you want to retire and, even more important, still have some time to make adjustments if you need to.

If you discover that you need to put more money away, consider these six time-honored retirement savings tips.

Can I Invest In The Full List Of Dividend Aristocrats Through A Fund

Dividend Investing (Retiring on Dividends, The Best Retirement Plan)

If you prefer not to invest in individual stocks, you can instead invest in high-dividend stocks through exchange traded funds.

There are even ETFs that invest specifically in the dividend aristocrats, as well as broader categories of high-dividend stocks. An example is the ProShares S& P 500 Dividend Aristocrats ETF.

The fund includes all 57 companies representing the full list of dividend aristocrats, and had an average dividend yield of 2.49% as of September 30, 2019.

The advantage of investing through an ETF is that you dont have to spend time choosing the stocks you will invest in, or managing your portfolio.

You can simply invest a flat amount of money in the fund, and have it represent a corner of your portfolio. The disadvantage is that youll be buying the entire portfolio of dividend aristocrats.

Notice that the average dividend yield for the ProShares S& P 500 Dividend Aristocrats ETF is just 2.49%. Compare that with the list of the top 20 performers weve included in the table above, and youll see they pay dividend yields ranging from a low of 2.6% to a high of 5.4%.

You certainly can invest through a fund, but youll improve your dividend yield by investing instead in the highest paying individual stocks.

Recommended Reading: Retirement Communities In Central Florida

Share post:

Popular

More like this
Related

Sign Up For Ssi Retirement

Do Social...

T Rowe Price 401k Retirement Login

International Equity...

Ohio Public Employees Retirement System

Law Enforcement...