Let me start by saying that I think everyone should be collecting dividends. It’s one of the simplest ways available to create a more secure and stable financial future. Granted, it’s a slow, methodical process that requires some patience and time to fully develop. But with a little persistence and determination, the reward of enhanced financial security down the road is well within reach. I see no reason not to take advantage of the opportunity.
I won’t try talk you into changing your spending habits or finding a way to eliminate debt so that you can have money to invest. That decision is up to you. I’ll just say I had to make the same decision, and while it wasn’t easy to alter course, it can be done. Where I was once spending thousands of dollars to cover debts, interest, and things I really didn’t need, I’m now collecting far more than that in dividends that will provide me a much more secure future. There’s no reason you can’t do the same.
Personally, my goal is to replace as much pre-retirement income with post-retirement dividends as possible. Having started late in life with this plan, it’s doubtful that I’ll be able to fully replace my current income. But, I should be able to replace a significant portion of it. Because I don’t need the dividends at the present, reinvesting them will greatly enhance my chances of achieving this goal.
If you can start the reinvesting process much earlier in life, you will almost certainly be able to replace most if not all of your income in retirement, within reason of course. Replacing an income of the Bill Gates or Warren Buffett level with dividends won’t happen. And if you were in that situation, I don’t think you’d have to worry about it anyway. But, if you’re situation is like most of the rest us, and you’re willing to forego some gratification now for a real reward later, it’s certainly within reach. In other words, if you can save and invest instead of spend, spend, spend, you can set yourself up to be financially self-dependent down the road.
I don’t see the social security system totally collapsing. A complete collapse would just be too politically painful for those in Washington D.C. to bear in that it would directly affect their overriding desire to be re-elected. I can see it being greatly reduced or altered in the future though. I’m certainly not an anti-government adherent, but I do think the government will most likely act in its best interests over mine. As such, I would rather not have to be totally dependent on social security or the machinations of politicians for my retirement security. Maybe I’m wrong, but I don’t think I’m alone in that assessment. My thinking is that the more dependent we can be in ourselves, the better off we will all be collectively. So, I want to collect dividends now and in the future to be able to support myself and my family as much as possible during retirement.
One final note. I have been asked time and again about whether I worry about the stock market collapsing and taking my plan down with it. My answer is always no and I point out that I am investing in companies not “the stock market.” I’m buying shares in companies, not the stock market. I’m receiving dividends from companies not the market.
The stock market makes it easy for me to purchase shares but the fortunes of the companies I invest in are the foundation for collecting dividends. I will gladly accept any stock price appreciation created by the market but my primary pursuit is shares that I hope to hold forever and the dividends associated with those shares. Because I’ve seen first hand how share values can plunge, I’m doing my best to create a situation where my retirement income is based on dividends, not volatile share prices dictated by the market.
Even if the stock market ceased to function, I have a reasonable belief that most if not all of the companies I invest in will continue to be in business, giving me a decent chance of continuing to receive dividends. And quite frankly if conditions are so bad that the market does cease to exist, there will be far greater problems to deal with anyway. So the short answer is no I don’t spend time worrying about something over which I have no control. Going forward, I choose to be cautiously optimistic instead of pessimistic to the point of inaction. I hope you choose to do so as well.