Not everyone has the luxury of 20-30 years to go before retiring. More than any other age group, the baby boomers, have "been there and done that". The biggest issue is that we (I am a baby boomer) did not have the power of the internet, nor the availability of all the educational tools that are available today, to make investment decisions. We sort of felt our way around and used the hit or miss method.
If we were lucky enough to know someone in the industry, we had an advantage, and if we already had wealthy folks, in all likelihood the money had been and probably still is, handled by an expensive money manager of some sort.
As for me, I was lucky enough to find dividend growth investing by accident. Actually, I was always involved in the stock market in one way or another, but mostly gambling. I picked stocks I thought looked good, overheard others and took some shots, and played with options. Fortunately, I also liked the fact that some stocks would pay me to own the shares, and I had a nice core group of stocks that eventually convinced me I was wrong all along, but correct at the same time.
I took my lumps back then, and stopped gambling and stuck to investing in mega cap blue chip dividend winners. I stopped selling great companies, and stopped buying "cactus" companies (yep that is what those wild ones were called back then). I reinvested my dividends, and plowed more money into just the stocks that paid me a "salary".
Unfortunately, I know more folks than I would like to, that were not as lucky as me, and some of them made 2 or 3 times the income I made, but worked 50 years and stuffed whatever money was left over at the end of each month in a passbook savings account or a cute little "Christmas Club" account. Those folks were not stupid, they did not want to have anything to do with the markets because their own folks went through the Great Depression, and were taught to be frugal and save but stay away from the big bad stock market.
I am not being facetious, I am trying to paint a picture of many folks who are new to investing, but are already retired or will be in a year or two.
These Folks Have Saved Their Whole Lives
It just might be you I am talking about, or our neighbors and friends who are all in their mid to late 60's and are just now looking at the world of investing. They have raised a family and paid off a house, and have done well in so many aspects. Unfortunately that passbook savings account has been earning putrid amounts of interest for many years, and even though these folks have saved better than 95% of the rest of the population, they are not looking at massive amounts of wealth, and have little, or no more time to build a dividend growth portfolio and let compounding do its "thing".
They have a pretty good pension and might be the last generation to even know what a company pension is. Social Security is ready to be paid and there is no fear among these folks that the payments will end in their lifetime.
Those are very positive places to be, and they will be able to get by without winding up on the street as long as they live by the same rules they always have. The one issue is that there is a "gap" between what they collect in social security, and pensions and what they need to pay for everything they have, without giving too much up.
If this sounds like you, don't let the noise frighten you into inaction. You still can take the bull by the horns and create income that you can use to supplement what you already have coming in. You CAN be proud that you worked and saved diligently and now you can even have some more.
A Portfolio Just For You
While the picture is not all rosy and bright, it is also not the end of the world. You can use the savings you have now, and create a stream of income that will grow all by itself just by buying the same mega cap dividend growth stock that I already own.
Using my FMBP I will illustrate how much you could have on a monthly basis from dividends right now, based on how much you might have saved over the years.
The portfolio consists of the following stocks: Exxon Mobil (NYSE:XOM), Johnson & Johnson (NYSE:JNJ), Coca-Cola (NYSE:KO), Procter & Gamble (NYSE:PG), AT&T (NYSE:T), Chevron (NYSE:CVX), McDonald's (NYSE:MCD), Walgreen (WAG), and General Electric (NYSE:GE), and ConocoPhillips (NYSE:COP).
The only stock not in this little portfolio is Apple (NASDAQ:AAPL) simply because the current yield is the lowest of all of them.
Here is a very simple chart that shows you how much you can expect to receive on a monthly (probably not the same each month though) basis at various amounts of savings.
By investing an equal amount of money in each of these stocks, you can develop an income stream that is likely to last a lifetime and grow all by itself just from annual dividend increases from each of these champion stocks.
The key will be for you to take the giant leap forward and trust the process. These are not "cactus" companies and they all have a well developed history of paying dividends over long periods of time. Only GE had to cut its dividend during the last great recession, the others just kept going like the "energizer bunny".
There are many other stocks to choose from and I am certainly not saying this is the holy grail of portfolios, but it is not that bad either. While nothing is ever risk free in the stock market, this type of portfolio could help you close that "gap", right now and have a more secure retirement.
The Bottom Line
You can do this if you want to, or you can hand over all of your money for an annuity in which you will never have access to your money again, or you can have a professional take a 1-2% fee each year for doing exactly the same thing as you can do for free.
The choices are STILL yours folks. Have a wonderful holiday!
Disclaimer: The opinions of the author are not recommendations to either buy or sell any security. Please remember to do your own research prior to making any investment decision.
Disclosure: The author is long AAPL, COP, CVX, GE, JNJ, KO, MCD, PG, T, WAG, XOM.
The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.