Are Dividends Reliable for Retirees in North Palm Beach?

Many seniors invest in stocks, and some of these stocks may pay dividends. If you’re an experienced investor, you already know all about how beneficial dividends can be. You might have received regular, passive income from your dividend-paying stocks over the decades. As you approach retirement, you may wonder whether your dividends can continue to provide a reliable income. You might want to discuss your full range of options with an estate planning lawyer in North Palm Beach.

Understanding the Benefits of Dividends for Retirees 

The benefits of dividend-paying stocks are varied, especially for retirees. Generally speaking, companies that offer dividends to stockholders are more stable and established than those that do not. Common examples of dividend-paying companies include insurers and utility companies. This reliability could be particularly attractive for seniors, and these companies may stand a better chance of weathering coming economic turmoil.

Dividends also allow investors to receive passive, regular income. This is another key priority for retirees who want to live on a fixed income and plan out their financial futures. When you know exactly how much you’ll receive in dividends every month or quarter, you might feel a greater sense of confidence. In contrast, relying on growth stocks for retirement security could make planning much more challenging.

Dividends also offer certain tax advantages. Sources state that taxes on dividends are lower than capital gains taxes. Often, they are much lower than the taxes associated with normal income. Taxes represent a major threat to seniors, and so these tax benefits could also be attractive.

The Downsides of Dividends for Retirees

On the other hand, dividends certainly come with their own fair share of downsides. First, dividend-paying stocks are more likely to be concentrated in certain industries, such as financials and energy. As a result, an investor who focuses entirely on dividend-paying stocks might find themselves overexposed to certain industries, and this lack of diversity could decrease overall financial security.

Some investors argue that instead of focusing on dividends, it makes more sense to sell stocks periodically. These investors also argue that it’s important to focus on the bigger picture or “total returns” rather than dividend payouts. Most investors believe that the best way to handle dividends is to immediately reinvest them, but this might not be in line with seniors’ priorities and needs.

Alternatives to Dividends 

There are many alternatives to dividends worth considering. These include bonds, treasuries, and annuities. Seniors might also want to consider how their dividend stocks might integrate into existing estate planning strategies, such as trusts, IRAs, 401(k)s, and life insurance.

Can an Estate Planning Lawyer in North Palm Beach Help Me? 

An estate planning lawyer in North Palm Beach may be able to help if you’re ready to assess retirement strategies. Dividends could be extremely useful as you enter retirement and begin to rely on passive income for the foreseeable future. That being said, this is not the only strategy available. You may want to discuss your unique priorities and financial situation with a lawyer before making your final decision. Continue this conversation with Kitroser Lewis & Mighdoll today.

Source: 

investopedia.com/ask/answers/010815/are-dividends-best-way-make-money-retirement.asp