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How To Never Run Out Of Money In Retirement

Summary

There are largely two types of dividend investors -- those who build the income portfolio from scratch and those who convert existing mutual funds to dividend stocks.

When you live off the income that your portfolio produces, the chance that you will ever run out of money is greatly reduced.

Charitable Foundations and Trust Fund Babies have been living off dividends for decades.

Here is the longer answer -- when you live off the income that your portfolio produces, the chance that you will ever run out of money is greatly reduced. If you have to sell portions of your portfolio and thus rely on finding someone else to sell at higher prices than you bought, then you increase the risk of outliving your money.

It is very easy to monetize a pile of cash and convert it into a neat dividend machine, which will deposit cold hard cash into your brokerage account regularly. You can then use that cash to either spend or to reinvest into more dividend paying stocks, paying even more cash.

As I discussed earlier, there are largely two types of dividend growth investors. The first group are those who have been putting money mostly in dividend growth stocks regularly, reinvested dividends, and maintained their portfolios. The second group include those who are trying to convert a nest egg accumulated over a lifetime of hard work, or an inheritance or another pile of cash received recently as a lump sum. Those are the ones who want to learn how to pensionize their assets and live off that pile, while also minimizing the risk of loss to the minimum.

If you are building a dividend growth portfolio from scratch, the first step is to start slow. Get a list of dividend growth stocks and identify the leaders in their industries that also have dividend growth streaks. A great place to start is the CCC list from David Fish, who tirelessly updates it every month. A long streak of regular dividend increases shows a company which is prospering, as evidenced by the higher amounts of cash it sends to shareholders. A company cannot fake cash for long, which is why many investors consider the proof of regularly increasing cash dividends as proof that earnings are increasing and business is good. It is also...


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