Retiring Is Not As Simple As It Used To Be

 |  Includes: HCBK, MCD, VZ
by: Chris Bluem

With the virtual elimination of defined benefit pension plans, individuals in the workforce are forced to save their hard-earned money for retirement through employer matching programs or independent investments. While many employers offer a 401(k) plan, oftentimes individuals must save additional money in order to not outlive their money. In order to generate significant returns over time one must invest in various asset classes, including equity securities.

The question is how much should be put in risky assets. As a general idea, an individual takes his or her age and subtracts it from 110, and that gives the percentage of exposure in equities for retirement. This is a simple guideline of how much money an investor should put in risky assets and doesn't take into account an individual's risk tolerance or any other personal issues. Obviously economic conditions, the wealth of an investor, and many other situations could result in a deviation to this guideline. Below are three stocks that I believe are a good start to any retirement portfolio. Generally, I look for stocks that pay generous dividends, have an excellent management team, and offer long-term growth opportunities.

McDonald's (NYSE:MCD)

Ever since McDonald's posted its first-ever loss in the early part of the 2000s, it has been one of the best corporate restructuring stories in history. The stock has performed extremely well, and for a good reason. It is now one of the best large-cap growth stocks around. This is an excellent long-term and retirement stock due to emerging markets growth and steady same-store growth within this county.

Earnings per share has grown to nearly twice the industry standard over the last five years at 18% and shows few signs of slowing down anytime soon. The company also boasts a profit margin of 19% compared to an average of 9.5% for the rest of the industry. The stock pays a generous 2.8% dividend, which is essential to any retirement stock.

Hudson City Bancorp (NASDAQ:HCBK)

Thrift institutions have been unfairly beat down by the market conditions and events of the past couple years, and I believe this presents a great buying opportunity at below book value for this company, which is consistently named one of the best managed banks in America according to Forbes. I believe a stock held for retirement should be a company with strong management first and foremost. The goal is to hold the stock for a lengthy time, and Hudson City presents a great deal of potential upside over the long term. Hudson City pays a generous dividend of 5%

Verizon (NYSE:VZ)

I currently believe Verizon is fairly valued due to long-term growth prospects. I believe Verizon has now developed a competitive advantage over cellular phone service providers like AT&T (NYSE:T) and Sprint Nextel (NYSE:S) from the iPhone acquisition. Verizon has the best service coverage as well as the Verizon FiOS service, which is rapidly growing. Verizon also has a large presence in emerging market economies and has plenty of opportunities to grow in North America and abroad. Verizon pays a lofty 5.3% dividend.

As always, investors should do their own due diligence on any investment prior to making a purchase. This article should serve as a starting point, and much more research will be needed.

Disclosure: I am long MCD, HCBK.