Dividends To Boost Your Retirement Income

Whether you're using income drawdown to draw an income from your pension or taking an income from an ISA or investment portfolio, we believe dividends have something to offer retired investors. A fixed retirement income might look attractive at first glance, but over time its spending power can be heavily reduced by inflation. Even historically modest inflation of 2.5% will reduce the spending power.

We believe equity income could be a solution. Dividend income has the potential to grow over time offering shelter against inflation. Companies' costs will rise, but they should be able to increase their prices too, thereby maintaining their profit margins. If profits rise in line with inflation, so should dividends, and by implication share prices should rise too. Additionally the best companies will find ways of increasing their revenue over and above the rate of inflation, or reduce their costs, significantly increasing profits. Of course, this is not a one-way bet - both income and capital could also fall. Dividend income is variable and not guaranteed, and capital will fluctuate in value so you could get back less than you invest.

Source: Hargreaves Lansdown

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