The Retirement Conspiracy [Part 5]

This is Part 5 in a 6 part series called “The Retirement Conspiracy The Retirement Conspiracy [Part 5] [By Jon Lewis] By Jon Lewis Tuesday, May 25, 2021 Note: This is Part 5 in a 6 part series called “The Retirement Conspiracy.” Go to [www.RetirementConspiracy.com]( to read the full series. Part 5: DIVIDENDS Hello again. In my last issue – [Part 4]( – I discussed the some of the drawbacks that come with the standard Index fund investing strategy known as “The 4% Rule.” Namely, that it’s expensive and relies on too many assumptions (particularly that a set series of expectations have to be met in order for it to work at all). Yet, as I explained in [Part 1]( 2]( and [Part 3]( there is a conspiracy against your retirement that makes saving in cash, savings accounts, or even fixed income instruments like Bonds essentially useless. So what are you to do? If your goal is to save for retirement and you want to generate some kind of cash income from your retirement nest egg… then where are you supposed to turn? …could it be dividend stocks? The Pros and Cons of Dividend Stock Investing Let’s look at this in the simplest way possible. First, the obvious pros. A dividend-producing stock allows you to essentially get paid to invest. You invest in a company and they pay you a certain amount of money per every share you own. Even if the stock goes down, you usually keep receiving this dividend payment That means, you can invest in a company (or several) that pay a dividend and even if the stock market crashes tomorrow or perhaps if the overall market ticks sideaways for years (as I illustrated has happened several times in [Part 4]( then you can still keep receiving a cash income from that investment. After all, even if the share price goes down – the amount of shares you own didn’t change. In addition to providing you with a cash income you could also use the dividend itself to compound – almost like you used to do when savings accounts had a strong annual percentage yield (APY). With each dividend payment, your account grows, as your account grows you own more shares, as you own more shares your dividend payment increases, which allows you to buy more shares…etc. Obviously these are all great pros for any current or would-be retiree looking for their investments to produce some kind of income. It really is the definition of getting your money working for you behind the scenes. But there are also some drawbacks… The Cons Of Dividend Investing [The Retirement Conspiracy [Part 5]]( - You Have To Buy A Lot Of Shares To See A Meaningful Cash Flow Let’s take one of the top 3 “Dividend Aristocrat” stocks in the S&P 500. A company is considered a Dividend Aristocrat if has raised its dividends consistently for at least the last 25 years. The Top three are: - AT&T (T) – 6.75% Current Yield - Becton, Dickinson, & Company (BDX) – 1.36% Current Yield - AbbVie, Inc (ABBV) – 4.48% Current Yield Let’s say your goal is to generate $60,000 a year in retirement income and, just to make things simple, let’s say you’re willing to take 100% of the dividend payments you earn as cash flow (so you’re not re-investing any of them). To make sure you’re diversified you spread out your investment between the top three Aristocrats. - $297,000 Into T gets you $20,047.50 - $1,500,000 Into BDX gets you $20,400 - $450,000 Into ABBV gets you $20,160 So all in all you’d need to invest a total of $2,247,000 to generate $60,607 in income per year. Seeing as how – to even make it onto the “Dividend Aristocrat” list – these stocks have increased their dividends over the last 25 years, you can be fairly certain that, even during a sharp market selloff or a sideways market, you’ll be able to keep generating this cash flow after this initial share purchase even if the value of your shares drop. And that can be very comforting. But as you can see, you’d need $747,000 MORE than what the “4% Rule” in index fund demands for a similar income. Of course – again – the upside is, if the market is trending sideways for years or has a sharp selloff, your cash flow probably won’t be effected. Of course, the S&P 500 index also pays a dividend, but typically that dividend only gos up past about 1.6% or so if there is a sharp market selloff. And as detailed in [Part 4]( – when your strategy is dependent essentially on 5% annual net gains, even an increased dividend won’t offset the loss of a sharp selloff. For example, in 2008 the S&P 500 dividend rose from 1.87% to 3.23%, but from 2007 to 2009 share prices dropped 56.9%...so it wasn’t much help. This is why people may choose individual dividend-producing stocks over an index fund only type of plan. Still, the cost involved to implement this type of strategy puts it out of reach for many people. You’d have to start very, very early or else you’d have to get a HUGE increase in income later on in life to be able to get to that level. - Anybody Company, At Any Time, For Any Reason Can Cut or Cancel a Dividend This is another issue and it’s an issue based on hope once again. Companies do not have an obligation to pay dividends. If a company faces a cash crunch that affects its ability to stay in business or remain profitable, one of the easiest expenses to eliminate is the dividend. For example, in 2020 during the Coronavirus Pandemic 57 companies in the S&P 500 Midcap 400 Index (21% of the entire index) cut dividends. If you’re relying on the cash income that dividend produces in retirement, it can be like the rug is getting pulled directly out from under you. Not only that – when a company cuts or slashes a dividend, this also usually causes the stock price to fall by a lot, which can also mean your overall position is now at a net loss. Again – I’m not saying dividends are a bad investment. On the contrary, they’re one of the absolute best out there. Not only that, there are ways you can “hack” dividends to get higher payouts fast, or even buy shares at a HUGE discount and get paid outsized dividends (just ask my Wyatt Investment Research colleague Steve Mauzy about it!). But – what I’m focusing on here is reliable cash income in retirement. And when it comes to that, it’s my belief that being in a situation where you’ve got all your life’s savings on the line and you’re simply “hoping” everything works out the right way just plain isn’t a very good place to be in. That’s why I think a better solution is to… Generate Your OWN Dividend Payments For $60,000 (or more) Per Year With 87.76% LESS Investment Capital How’s this for a solution? What if you could generate the same amount of yearly income as I outlined with the above dividend investment scenario….but with 87.76% LESS capital requirement? And what if you could do it without even relying on a stock to pay dividends? In fact – what if you could CREATE your own dividends on any stock you want? [When you go here I’ll show you how my 70/30 Cash-on-Demand Income Formula]( able to do just that.]( Tomorrow, in the last part of my series, I’m going to give you all the details on a secret method of beating this “Retirement Conspiracy” and taking control back over your financial destiny. Trade Wisely, [Jon Lewis] Jon Lewis [Read more on DailyProfit.com]( [Take a 7 day break from these emails]( [Unsubscribe from these types of emails]( [Manage your email preferences]( [Wyatt Investment Research] Disclaimer & Important Information [Wyatt Investment Research (“WIR”)]( owns and publishes the website WyattResearch.com, other web sites, and, through its subscription services, various investment newsletters, trade alerts, and other investment-related educational materials. Those publications are informational in nature – WIR is not your financial adviser and does not provide any individualized investment advice to you. You should perform your own independent research on potential investments and consult with your financial adviser to determine whether an investment is appropriate given your financial needs, objectives, and risk appetite. This publication should not be construed as an offer to sell or the solicitation of an offer to buy any security. 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