LIFETIME INCOME: Here’s How It Works

Living paycheck to paycheck can be a daunting and demoralizing experience. It’s hard to save for the future when you’re always worried about making ends meet today. What if there was a way to break free from this cycle and achieve lifetime income security? It’s not impossible – read on to find out how it works.

https://en.wikipedia.org/wiki/Passive_income

1. The key to lifetime income security is to make money work for you.

It seems like a simple concept, but most people either invest their money in low-yield savings accounts or let it sit under their mattress. Both of these options don’t offer much growth potential, especially when compared with the things that your money could be doing if you invested it on your behalf. For example, investing in stocks can allow your capital to grow by 10% every year without adding any extra effort on your part! With dividends reinvested, returns can compound rapidly over time – this means that instead of earning 10% per year on $10,000 of investment capital, you’re earning 10% per year on $11,000 of investment capital after year one, then 10% on $12,100 after year two and so on.

2. There are different types of income investors invest in stocks for several reasons, but income is typically a secondary objective to capital appreciation.

In other words, the goal is to buy low and sell high over time which can result in significant growth of your capital. Although this is achievable with almost any stock, not every stock pays out dividends! That’s where exchange-traded funds (ETFs) come into play – they allow you to get exposure to entire markets or market segments without having to pick individual companies. The Vanguard Total Stock Market ETF ( NYSE: VTI ) pays a monthly dividend that has averaged around 1.9% per year since its inception in May 2007.

3. ETF dividends are automatically reinvested.

Is lifetime income set in your 20s?

All of the 1,700+ stocks and ETFs listed on NYSE: Nasdaq offers dividends to shareholders each quarter, but not all companies choose to pay out dividends. Of those that do pay a dividend, some investors elect to have their next dividend payment deposited into their bank account while others reinvest it into additional shares or another security (such as an ETF). Either way, once the money is there you can use it however you like!

4. So how does this work in practice?

Let’s take a look at the hypothetical example below using NYSE: VTI – Vanguard’s Total Stock Market ETF. This is not meant as investment advice (obviously), but rather to illustrate the rules of dividend reinvestment. Hypothetical Example :

In this example, we have a total of $10,000 invested ($8,300 in NYSE: VATIX – Vanguard’s Total International Stock ETF and $1,700 in NYSE: VTI ) which has grown by 350% over 10 years into a sizable nest egg.

Even though the returns on these investments were outstanding, imagine how much better things could have been if they had been left completely untouched (assuming no transaction fees) to grow uninterrupted! This is why lifetime income security is all about letting your money make as much money as it can for you over an extended period.

Let’s take a look at how things would have been different if we elected to re-invest the dividends back into the ETFs:

Wow! By simply re-investing all of the dividends and letting them compound over time, this $10,000 investment has grown by almost 2,500% and will now pay out more than $26,000 in annual income ($23,200 from VTI and $2,700 from VATIX). On top of that, because we never touched any of our capital gains (all dividends were re-invested) our dividend yield skyrockets to an eye-popping 5.2%! The idea of having a guaranteed 5.2% annual income stream isn’t so far-fetched when you think about it – after all, there are plenty of companies that pay this amount or more to their shareholders every year.

5. The best part is that, if implemented correctly, dividend reinvestment can become an automated process with no extra effort on your part.

When you buy any stock, ETF or mutual fund, the brokerage firm that handles your account will have options for how future dividends can be paid out to you – whether they are deposited directly into your bank account each quarter or used to purchase more shares of the security in question. Vanguard has an excellent example showing how easy it can be to set up dividend reinvestment across multiple accounts.

https://championteammarketing.com/lifetime-income-set-in-20s/

It’s as simple as checking a box and entering the number of shares you want to purchase whenever dividends are automatically reinvested. This can be done once a quarter or month, or even daily if you so choose! The important thing is that it is your money and your decision how to use it – nobody else’s. Just because dividend reinvestment has been discussed here today doesn’t mean it’s right for everyone. Most investors probably have no interest in viewing their monthly cash flow into a 5% yield stock, but if that is your cup of tea then there isn’t anything stopping you from doing just that. Whether you decide to take advantage of dividend reinvestment now, later, or not at all will ultimately depend on your objectives and what you value in a long-term investment. Happy investing!