What if we live beyond our means, never plan for our later years, and have absolutely nothing but social security benefits to live on? Well to be rather blunt, we would more than likely not have a great "golden years" period. Yes, there are many people who simply do not care and whatever happens, happens. The good news here is that if you are reading this, you already have a better shot at a financially sound retirement. Now, please drag some folks you know over to Seeking Alpha to read some of my simple little articles!
What Might Happen If We Rely Solely On Social Security Benefits?
The average benefit from social security is about $1,300/month for an individual and for a couple is roughly $2,200/month. Since I have already shown what the average couple spends annually during retirement, the difference could be around $30k per year! If you have nothing else, then your simplest option is to reduce your expenses to less than your income. If you think that is an easy task in this scenario, then you are living in a fantasy world. This article gives us an idea of just how common this situation actually is:
Nine out of 10 Americans 65 and older receive Social Security benefits, and it's often their primary source of income. Social Security was at least 50 percent of income for 52 percent of beneficiary couples and 74 percent of single beneficiaries, and at least 90 percent of income for 22 percent of couples and 45 percent of singles.
This Forbes article paints an even more dire scenario for the future:
...most Baby Boomers will be down to subsistence living by the time they are 80-living on Social Security and other government benefits with help from any capable children.
I would love to hear from our readers if you are one of those rare creatures that can make a go of it on 15-20k per year, and how you do it. It's probably not impossible but I doubt if I MYSELF would want to be on that position.
The Limited Options
Well, as tough as it may be, there are some options that an individual can take to help squeeze by.
- Reduce expenses to less than your SS benefit, forever (this will be a very frugal lifestyle at best).
- Work until you are 70 1/2 to receive roughly 35% more SS income. Even if you do not live a long life, you will ALWAYS have a higher benefit, as will your spouse if they never worked.
- Work part-time to close the gap between your expenses and income.
- Make arrangements to live with your adult children and share your income with them to help defray their costs.
A Few "Outside The Box" Side Gigs
Those of us who are healthy and physically well enough might consider several "unique" side jobs to help boost your income.
Golf Ball Retrieval
Don't laugh too hard, but even the US Bureau of Labor Statistics has an entire section on this "job":
Typically, golf ball divers earn money for each ball they recover. Buyers include the golf course, retailers, and golf ball companies. Anecdotal information suggests that divers earn about $200 a day.
If you like golfing and scuba diving, this just might work!
I couldn't find any statistics from the BLS, however, it does seem to be a popular "cult" thing to do!
...dumpster diving seems to be totally blowing up… it's basically green's answer to dubstep for search query volume and media references. Check out Google's trend analysis and you can see the dumpster diving traffic spike laid out pretty clearly, with Portland, OR leading the way...
You might not make much cash, but you just might be able to subsidize your food bill! Maybe even clothing! Here is an actual article on some key "tips" for successful dumpster diving. I think if you are going to do this, you might as well do it right, don't you?
So for those of you out there interested in saving a ton of money on food, reducing your environmental impact, or sharing a huge bounty of food with your friends and people in need I'm here to help with that.
I am not sure about you, but I am not thrilled with this option!
Professional Dog Walker
This side gig is actually quite popular! Of course, you have to like dogs, have no allergies to them, and be prepared with plenty of "pooper-scooper" baggies! Rather than having me tell you about it, check out this article:
The benefits to opting for this type of business are clear. Dog walking for a living allows people who enjoy both the outdoors and the company of canines to combine business with pleasure.
Any initial outlay to become a professional dog walker is also reasonably small, with transport the only real material expense to those launching their business.
photo credit: Alberto Gonzales/Flickr
According to a survey conducted by the National Association of Professional Pet Sitters (NAPPS), animal caretakers charge a median rate of about $16.00 for a thirty-minute visit, which is the length of a standard dog walk.
At this rate, if you did five walks a day every weekday, your dog walker salary would be $19,000.00 per year.
Not to be outdone by dumpster diving, here is an article with 7 tips on being a great dog walker! This side gig might actually be fun!
OK, Chuckle Time Is Over, So Hopefully You Will Get Down To Business!
Of course, all of this might be considered tongue-in-cheek, and I am attempting to get a few laughs on yet another rough day, but obviously I am once again trying to get my message across that saving and investing as soon as you can, for as long as you can, just might "save" you from even THINKING about the above options.
The model Dividend King Retirement Portfolio was constructed for those of us with shorter time horizons and a lower risk tolerance level, but by no means is it a one size fits all approach, especially if you have 15+ years to go before you decide to quit the "rat race".
The model DKRP currently consists of Coca-Cola (KO), Procter & Gamble (PG), Johnson & Johnson (JNJ), 3M (MMM), Emerson Electric (EMR), Cincinnati Financial (CINF), Lowe's (LOW), Hormel (HRL), Colgate-Palmolive (CL), Dover (DOV), and AT&T (T).
By having a plan to invest (and re-invest) in some of the greatest companies on the planet, that have a history of paying and INCREASING their dividends for over 50+ consecutive years, you just might be giving yourself a better shot at a more secure financial future. The "secret" is to focus on income, start investing as soon as you can and keep re-investing the dividends to add more shares as time goes by.
Aside from the current market, adding shares by buying the dips will grow the portfolio exponentially. More shares mean more income. Keep in mind that due diligence is required to make sure that the companies in YOUR portfolio can continue to pay and increase their dividends. If not, then be prepared to take action and make changes in your core. Other than that, buying and holding STILL works with this approach as long as you have the risk tolerance level to ignore daily share price fluctuations.
Keep in mind that over the very long term, the markets have ALWAYS gone higher, even after the most disastrous corrections and/or bear markets:
The stocks within the portfolio are just a few of the Dividend Kings that have achieved this elite status and all of them can be found right here.
The current 2018 (updated) Dividend Kings list:
American States Water (AWR) - 63 consecutive years
Dover - 62 consecutive years
Northwest National (NWN) - 62 consecutive years
Emerson Electric - 61 consecutive years
Procter & Gamble - 61 consecutive years
3M - 59 consecutive years
Vectren (VVC) - 58 consecutive years
Cincinnati Fin. - 57 consecutive years
Johnson & Johnson - 55 consecutive years
Coca-Cola - 55 consecutive years
Lancaster Colony (LANC) - 55 consecutive years
Lowe's - 55 consecutive years
Colgate-Palmolive - 54 consecutive years
Nordson (NASDAQ:NDSN) - 54 consecutive years
F&M Bank (OTCQX:FMBM) - 53 consecutive years
Tootsie Roll Industries (TR) - 52 consecutive years
Hormel Foods - 51 consecutive years
ABM Industries (ABM) - 50 consecutive years
California Water Services (CWT) - 50 consecutive years
Federal Realty Investment Trust (FRT) - 50 consecutive years
SJW GROUP (SJW) - 50 consecutive years
Stanley Black & Decker (SWK) - 50 consecutive years
Target (NYSE:TGT) - 50 consecutive years
I would guess that there are lots of folks who would prefer giving this approach a shot rather than dumpster diving!
But Wait, How About The Cash I Have Been Building??
Several months ago, I stated that since I am a retired old guy, I was not going to continue buying every dip and would wait for a real, steep correction that lasts longer than 24 seconds. It appears that I made the correct decision. I have not added one share of anything nor have I sold anything. As far as I am concerned, the new tax rules and corporate earnings have been strong enough for the companies I follow, but the uncertainty of almost everything else is allowing this market to sell off in such a sporadic manner that even if I had a crystal ball, it would probably freak out!
From a technical standpoint, it looks like we keep testing support levels, and if you have been buying every dip, you might be running out of cash at some point. I myself am only 50% invested and I will continue to wait for a large leg down to begin adding to my shares.
That being said, the model DKRP, as well as other dividend kings, might have actually hit correction territory. What that means to me is that I will begin making a shopping list of several good buys that I will consider adding to.
Let' take a look at where this model portfolio stands:
As you can see from the chart above, after 6 months of craziness, there are not many stocks that are even close to true correction territory. The only one that I will be doing research on for POSSIBLY adding to the 3M position. I will let you know what I decide.
For the record, 3M is selling for about $212 share (as of 4/2/2018) and yields roughly 2.50%. The current price is below the mid-point of the 52-week high and low (188-259) and is a combination technology, industrial, and consumer product company with a very wide moat as well as a stellar balance sheet. Its funds from operations at the end of 2017 were $5.62 billion and its free cash flow was at a very healthy $4.89 billion. Strong enough to continue paying and increasing its dividend as it showed back in late January by raising its dividend by a very generous 16.2%, from $1.17/share to $1.36/share.
At the time, the yield was only 2.2%, so the drop-in share price and the increased dividend makes this a stock I would consider adding to, even in this wacko market.
All of this being said, I am STILL completely content to continue building cash while this market continues its recent gyrations. If I had 10+ years to go before I retire, then I probably would be taking small bites of each stock to grow the number of shares held and the income. Being retired and having enough of an income stream right now makes building cash and capital preservation higher priorities for me.
I continue to dislike this market as a whole, by the way. How about YOU?
The Bottom Line
Hopefully, you got a few laughs from this article, but the unfortunate truth is that without a plan, you just might face very limited options to have a more secure financial future. I will continue to keep you posted as to what I am doing with cash reserves.
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Not To Bore You, But...
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Disclaimer: The opinions and the strategies of the author are not intended to ever be a recommendation to buy or sell a security. The strategy the author uses has worked for him, and it is for you to decide if it could benefit your financial future. Please remember to do your own research and know your risk tolerance. The long positions held are based upon what the model portfolio holds, and I personally could have held all of the stocks noted at one time or another.
Disclosure: I am/we are long CINF CL DOV EMR HRL JNJ KO LOW MMM PG T ABM AWR CWT FMCB FRT LANC NORD NWN SJW SWK TR VVC. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: The portfolio is for educational purposes only and not an actual portfolio. The long positions are based on the model portfolios.
Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.