If your 401k, or 403b has grown, how do you turn savings into spending money for retirement?
You can set up a monthly deposit to your bank account by withdrawing money from your former employer-sponsored retirement plan.
However, you are likely to be selling shares of the investments which represent the principal, not the dividends or earnings.
Creating a Self-Directed IRA for Dividend-Rich Investments
An alternative approach is to create a self-directed IRA which could allow you to invest in dividend-rich investments. If you could withdraw the dividends, reinvest the capital gains, and not deplete the principal monthly, then your account might increase in value at the same time the dividends were contributing to your cash flow and helping you pay for groceries etc. Investments can gain or lose value. Dividends are not guaranteed. Nonetheless, a portfolio can be designed for pursuing cash flow and growth. This approach is attractive because it looks at present needs and future goals.
Building a Dividend-Rich Portfolio
There are companies in the groups identified as Kings that have recorded dividends and dividend growth for fifty years. Stocks in the Aristocrat group have a dividend track record of twenty-five years. Look within those two groups for candidates for a dividend-rich portfolio.
Assessing Retirement Income Needs and Sources
How much income do you require during retirement to maintain your living quarters and to maintain your lifestyle? What are your sources of income? Is there a gap between what you require and your income sources? Can dividends fill that gap?
Financial planning is a process of analyzing your needs and seeking to maximize your assets to satisfy those needs.
General Disclaimer on Financial Planning and Investments
Securities and Advisory Services are offered through LPL Financial, a Registered Investment Advisor. Member FINRA/SIPC.
Content in this material is for general information only and is not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results.
Contributions to a Traditional IRA may be tax deductible in the contribution year, with current income tax due at withdrawal. Withdrawals prior to 59 ½ may result in a 10% IRS penalty tax in addition to current income tax.
The S&P 500 Dividend Kings and Aristocrats are stock market indices composed of the companies in the S&P 500 index that have increased their dividends in each of the past 50 and 25 consecutive years, respectively.