3 Preferred Dividend Stocks to Enhance Retirement Income

As growing numbers of retirees face the challenge of ensuring that their savings last through their retirement years, there's mounting anxiety over the risk of depleting wealth. Historically, retirees could rely on fixed-income investments and Social Security, but today's lower yields and uncertain future benefits necessitate a different approach.

The Challenge with Traditional Retirement Planning

Once upon a time, investors on the cusp of retirement could park their money in assets like Treasury bonds and enjoy healthy returns. Not long ago, Treasury bonds would offer about 6.50% in yields, providing a reliable income stream for retirees. Alas, those days are long gone, and the current yields have significantly dropped, impacting the retirement income strategy for many. Meanwhile, concerns about the longevity of Social Security benefits add to retirees' worries, with predictions of fund depletion by 2035.

A New Strategy: Dividend Stocks

Where does that leave today's retirees? There's an alternative that could potentially fill the income gap—dividend-paying stocks. By investing in established companies with a history of consistent and increasing dividends, retirees can benefit from a more reliable source of income. These stocks are typically less risky and provide an income that can keep up with inflation, thanks to dividends that often increase over time.

Investors should look for dividend yields around 3%, accompanied by positive annual growth. Such criteria help in identifying stocks that can help sustain and potentially grow retirement incomes over time.

Top Dividend Stock Picks for Your Portfolio

Considering these guidelines, here are three dividend stocks to consider incorporating into your retirement portfolio:

• Axis Capital: With a 3.18% yield and a history of dividend growth, this insurance provider represents a notable option for steady income.
• Bar Harbor Bankshares: A yield of 4.03% and significant dividend growth over the past year makes this bank a strong candidate for retirement investment.
• COPT Defense: Offering a 4.63% yield with continued dividend growth, this trust is an attractive choice for those looking to bolster their income with real estate investments.

The Consideration of Risk

While stocks inherently carry more risk than bonds, choosing high-quality dividend stocks can mitigate some of that risk, while also potentially offering growth and decreased portfolio volatility. The resilience of blue chip companies in maintaining and increasing dividends can serve as a guard against inflation's erosion of retirement funds.

Be Wary of Fees in Funds

If you're contemplating dividend-focused mutual funds or ETFs as an alternative, it's vital to be cautious about the fees. High fees can eat into potential investment gains, potentially undermining the purpose of a dividend-based strategy. Those preferring funds should seek out quality dividend funds characterized by low fees.

Conclusion

Ultimately, whether through direct stock selection or careful fund investment, integrating dividend-paying equities into your portfolio may present a promising solution for a more secure and fulfilling retirement.

retirement, dividend, investment