Dividends4Life: Amazing Dividend Stocks to Help You Reach Retirement

Amazing Dividend Stocks to Help You Reach Retirement

Posted by D4L | Wednesday, November 05, 2014 | | 0 comments »

A famous 1994 study by William Bengen gave us the famous "4% drawdown" rule of thumb, which states that retirees should withdraw no more than 4% of their portfolio each year in order to not run out of money. Bengen also suggested that a mixture of 60% equities (stocks) and 40% intermediate government bonds is, in general, the optimal asset allocation during retirement. This article will introduce you to one of the most powerful strategies in the entire investing universe and explain how it can help you live your dreams in retirement.

A 2008 study found that between 1968 and 2007, the 100 top-yielding stocks in the S&P 500 returned 13.52% annually versus 10.53% for the S&P 500 as a whole. That's the difference between a $10,000 investment becoming $496,000 after 39 years (insufficient for retirement) and $10,000 growing to $1.41 million (more than sufficient). In addition, this portfolio had a sharpe ratio (which measures a portfolio's proportion of reward to risk) that was 43% better than the broader market's. If that weren't enough, Bengen claimed that, should a retiree pursue a high-yield portfolio strategy, their maximum safe withdrawal rate could be raised to 5% annually, greatly improving their quality of life during retirement.

Source: Motley Fool

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