Investing early and often can be an effective way to set yourself up for a great retirement.
Living off dividend income can be a great goal to strive for in retirement. Expenses are often lower during your retirement years, and generating $50,000 in annual dividends can help you live comfortably.
And while that is not a small amount of dividend income, generating that much in the future may not be as daunting of a challenge as it appears to be. Here's a look at how investing $50 per week can help fund your retirement years.
Investing in growth is the best option to build up your portfolio
Dividend stocks can be safe options for investors on a fixed income who need stability. But if you're looking at an investing period the spans decades, then growth stocks can be a much better option for you. That's because while there might be volatility and bad years along the way, that should balance out over the long term.
A great example is the performance of the Invesco QQQ Trust (QQQ 0.54%), which gives investors exposure to the top 100 nonfinancial stocks on the Nasdaq Stock Market. The tech-heavy fund includes big names such as Apple, Microsoft, and Amazon. Over the past 10 years, its total returns (including dividends) have totaled 407%. That averages out to a compounded annual growth rate of 17.6% -- well above the long-run average of the S&P 500, which is close to 10%.
The fund is a good place to invest, especially if you're unsure of which stock(s) to put your money into. It can simplify your investing strategy, making it easier to set aside money every week into the fund.
Getting your portfolio to $1 million is the key
Before you can rely on dividend income, you first need a fairly large portfolio balance. And you can build it up over the years by investing just $50 per week (assuming minimal or no commission costs).
This chart shows you how, over a period of 30 years, investing $50 every week could grow your portfolio to more than $1 million.
Chart by author.
Assuming a 15% annual growth rate (on average), a $50 per-week investment could grow to a value of more than $1.5 million after 30 years. And it would take a little more than 27 years for it to hit the $1 million mark.
Averaging such a high growth rate may be challenging, but even if it's not quite that high, you could still end up close to or over $1 million. And with a growth-focused fund such as the Invesco QQQ Trust, you can maximize your odds of achieving those kinds of returns without having to take on much risk in the process.
The next step is to invest in dividend stocks
If you get your portfolio to $1 million or more, you've accomplished the hard part. Once you've got a balance that high, you can put it to work by investing it into high-yielding dividend stocks. During your retirement years, you'll likely want to move away from growth stocks anyway, and into less volatile investments. And the higher that balance gets, the less of a dividend yield you'll need to generate some significant income.
If, for example, your portfolio gets to a value of $1.5 million, you could invest in a fund or multiple investments that yield an average of 3.3%. At that rate, you could generate $50,000 in annual dividends. With a lower portfolio balance of $1 million, you would need to target an average yield of 5%.
Invest early and often for the best results
Amid inflation and rising interest rates, it's not an easy time to find money to invest in stocks. But if you can find a way to cut $50 per week out of your budget to invest into a diversified fund such as the Invesco QQQ Trust, it can pay off in droves for you later in life.
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Apple, and Microsoft. The Motley Fool recommends Nasdaq. The Motley Fool has a disclosure policy.
FAQs
If you invest $50 per week, that's the equivalent of $200 per month, or approximately $2,400 per year. Over a 30-year period, that would result in more than $72,000 in savings. It's a good chunk of savings, but it isn't a life-changing amount. This is where the power of compounding comes into play.
How much do you need to invest to make $1000 month on dividends? ›
In a market that generates a 2% annual yield, you would need to invest $600,000 up front in order to reliably generate $12,000 per year (or $1,000 per month) in dividend payments. How Can You Make $1,000 Per Month In Dividends? Here are the steps you can take to build yourself a sufficient dividend portfolio.
How can I invest $50,000 for a quick return? ›
Here are 10 options to help you and your family use $50K to build wealth and financial stability over time.
- Max out your retirement accounts. ...
- Contribute to a health savings account (HSA) ...
- Fund a 529 college savings account. ...
- Stash it in a high-yield savings account or CD. ...
- Invest in Treasurys. ...
- Invest in an index fund.
How To Turn 50K Into 100K – The Best Methods To Double Your Money
- Start An Online Business. ...
- Invest In Real Estate. ...
- Invest In Stocks & ETFs. ...
- Invest In A Blog. ...
- Retail Arbitrage. ...
- Invest In Alternative Assets. ...
- Create A Rental Business. ...
- Invest In Small Businesses.
And you can build it up over the years by investing just $50 per week (assuming minimal or no commission costs). This chart shows you how, over a period of 30 years, investing $50 every week could grow your portfolio to more than $1 million.
How much interest does $50,000 earn in a year? ›
5% APY: With a 5% CD or high-yield savings account, your $50,000 will accumulate $2,500 in interest in one year. 5.25% APY: A 5.25% CD or high-yield savings account will bring you $2,625 in interest within a year.
How much money do I need to make 50000 a year in dividends? ›
at an average 5% yield an investor will need $1 million in dividend bearing stocks to create $50K in income yearly. Let's take a look at seven stocks to consider that can get any investor to that goal with enough time.
How much to invest to get $4,000 a month in dividends? ›
But the truth is you can get a 9.5% yield today--and even more. But even at 9.5%, we're talking about a middle-class income of $4,000 per month on an investment of just a touch over $500K. Below, I'll reveal how to start building a portfolio that could get you an even bigger income stream than this today.
Can you live off Reit dividends? ›
Reinvesting REIT dividends can help retirement savers grow their portfolio's investment, and historically steady REIT dividend income can help retirees meet their living expenses. REIT dividends historically have provided: Wealth Accumulation. Reliable Income Returns.
What is the safest investment for $50000? ›
If you're investing for a near-term goal, you'll likely want to have more exposure to safer investments such as bonds and bond funds, CDs and high-yield savings accounts. These alternatives offer regular income and help reduce the risk and volatility in your portfolio.
Imagine you wish to amass $3000 monthly from your investments, amounting to $36,000 annually. If you park your funds in a savings account offering a 2% annual interest rate, you'd need to inject roughly $1.8 million into the account.
Is CDs a good investment? ›
Is it worth putting money into a CD? For some people, it can be worth putting money into a CD. If a person is seeking a riskless investment with a modest return, CDs are a good bet—you'll earn a higher rate than you would with a checking or savings account, but you'll have to commit your funds for a fixed period.
How can I double my $1000? ›
Here's how to invest $1,000 and start growing your money today.
- Buy an S&P 500 index fund. ...
- Buy partial shares in 5 stocks. ...
- Put it in an IRA. ...
- Get a match in your 401(k) ...
- Have a robo-advisor invest for you. ...
- Pay down your credit card or other loan. ...
- Go super safe with a high-yield savings account. ...
- Build up a passive business.
One way to potentially double $5,000 is by investing it in a 401(k) account, especially if your employer matches your contributions. For example, if you invest $5,000 and your employer offers to fully match at 100%, you could start with a total of $10,000 in your account.
How can I double my money in quick time? ›
For short-term earnings look to higher-risk investments
If you need to double your money on a fairly quick timeline, old standards like savings accounts or buying real estate likely aren't going to do it for you. Instead, you'll need to focus on higher-risk investments.
Can I survive off of $50 a week? ›
Planning out your meals so you use all of the ingredients, both raw and cooked, plus pantry staples and frozen goods means you can make a week's worth of dinners for around $50 in groceries.
How much is $50 a week for a year? ›
Investing $50 a week, which translates to approximately $200 a month, is an excellent way to build your savings without putting a significant strain on your budget. Over a year, you'll have invested $2,600, and this consistency is key.
How much is $50 a week in a month? ›
How much is your salary? $50 weekly is how much per month? If you make $50 per week, your Monthly salary would be $217. This result is obtained by multiplying your base salary by the amount of hours, week, and months you work in a year, assuming you work 40 hours a week.
How much is $50 dollars a day for a week? ›
If you make $50 per day, your Weekly salary would be $250.
