Ultimate Dividend Goals:
When I was a young guy- very young, I can remember having a savings account that paid 7% interest. I can almost remember having one that paid 5 3/4% compounded daily. Those were the days. When I was about 16 years old, I was talking with my father and the subject came up about retirement income and how much I needed to ultimately have saved to generate the desired total. At the time, the magic number was $70,000. That was in the mid 80’s and 7% was an easy mark on a cd- so $1,000,000 was the other magic number. How things have changed.
1. High interest rate cds are currently a thing of the past.
2. With inflation, that $70,000 is not what it used to be.
3. Because of the low interest rates and the need to keep up with inflation, the $1,000,000 is not nearly enough.
The question now becomes how do I get the “nut” and how much do I need?
Many ways to accumulate the “nut” come mind, but I feel that one of the best ways to accumulate great wealth over a working career would be to regularly contribute as much as possible to IRAs and also, in my case Simple IRAs and invest in good companies that pay growing dividends regularly.
I have been using this process for many years now. I am nowhere near generating the amount that I want to ultimately generate, but I am on my way. That original $70,000 goal is potentially in sight, but the new number ($150,000) is somewhere down the road. Given that most of my stocks return about 3-4%, the number needed to accumulate is somewhere north of $4,000,000. Given the effect of compounding and reinvesting the numbers will not be exact, but this gives me a frame of reference.
So, as of September 2014, my ultimate retirement goal is by 2030:
Annual dividend income goal: $150,000.
Value of IRAs needed: >$4,000,000.
I better get to work!