2022-11-25 11:36:00

Why You Can't Just Bank on Dividends for Retirement Income

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Nasdaq
By The Motley Fool

You'll often hear that it's important to hold different investments in retirement that allow you to continue generating income. After all, Social Security is facing possible benefit cuts, which may result in a lower monthly benefit for you down the line.

And even if Social Security cuts don't come to be, those benefits will only replace about 40% of your pre-retirement income if you earn an average salary. If you're an above-average earner, you'll get an even smaller amount of replacement income, percentage-wise. And while retirees can often get away with having less than 100% of their former paychecks, they generally need more than 40% to live comfortably.

Image source: Getty Images.

That's why you may be inclined to put money into dividend stocks ahead of retirement and hold them during your senior years. That way, you can use those ongoing payments as a means of covering your retirement expenses.

Holding dividend stocks is indeed a good way to supplement your Social Security income. But you should definitely branch out beyond there.

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