Investors typically look for reliable income from retirement stocks. Thus it should come as no surprise that the stocks seniors love are primarily blue chip dividend stocks. Forbes writes about seniors’ stock preferences.
Replacing Berkshire, Facebook and Bank of America in Seniors’ portfolios are Verizon Communications, Pfizer and IBM which do not appear in any other group’s top ten.
Sherrod points out, “In the Boomer and Senior portfolio you’ll see a little bit more in the way of high yield and with the Millennials you’ll see a little more in the way of high beta.” In other words older generations are investing for income while younger generations are investing for growth. This may be one of the reasons AT&T is popular with these groups – the telco has a 5.4% dividend yield. This may also account for some of their relatively lower interest in Berkshire – Buffett doesn’t pay a regular dividend.
The retirement stocks most loved by seniors and their dividend yields are these:
- Verizon Communications, 4.46%
- Pfizer, 3.25%
- IBM, 3.04%
- Apple, 1.59%
- AT&T, 5.36%
- GE, 3.34%
- Exxon Mobil, 3.41%
- Microsoft, 2.6%
- Johnson & Johnson, 2.99%
- Intel, 2.92%
The retirement stocks chosen by seniors are solid companies with a reliable dividend check and solid R&D.
Stocks versus Bonds
The IRA Market Report looks at dividend stocks versus bonds in retirement.
[D]ividend stocks are often better than bonds for retirement investing for a number of reasons.
While bonds have traditionally been viewed as a sure bet for retirement investing, the low yields of today mean that you must invest nearly $1 today for every $1 you want to take out in retirement. If inflation rises considerably between the time you purchase the bond and the time that you retire, you will lose a significant amount of the purchasing power of your account. Most people would prefer investments that grow faster and compound to provide them with more money in their retirement years than they originally put in.
If you retire in your sixties and expect live another twenty years or more you will want to see some growth in your retirement portfolio. If you purchase these stocks before retirement and put them in your IRA you can defer taxes on the dividends until you withdraw and are in a lower income bracket.
According to The Street the biggest retirement mistakes have little to do with choice of retirement stocks. The biggest mistake is not taking advantage of tax deferred retirement accounts.
“Not maximizing retirement contributions is a major error that a lot of people make,” Slott says. “People need to take advantage of every option to keep putting money away in a retirement account.”
Slott tells folks aged 50 and older not to miss catch-up contributions so as not to lose out on opportunities to save for retirement. He adds that future retirees should take advantage of spousal IRAs for nonworking spouses and tells them to keep making Roth IRA contributions even after 70½ if they have the earnings.
Another big no-no in Slott’s opinion: retiring too early.
“The longer you work and keep earning, the more retirement money you can continue to sock away in a Roth IRA,” says Slott. “If you are still working, you can probably avoid taking Social Security for longer, allowing your future benefit to increase substantially. From age 62 to age 70, your monthly check goes up every month you delay.”
Work long enough. Take advantage of every tax advantage retirement vehicle that you can. And pick solid retirement stocks that pay healthy dividends.