“I’ll be working long as my two hands are fit to use” — “Working Man Blues” by Merle Haggard


EDITOR'S NOTE: This is the first in a series on the retirement crisis.


Do you remember the day you realized you didn’t want to work for the rest of your life? Or perhaps realized you couldn’t? For many people, this is also the day you come to grips with the fact that if you have not been putting money aside for retirement, full retirement may remain an unrealized dream.

Many people do indeed realize this fact, but have limited resources to do much about it, and this is the heart of a looming and distressing domestic and global retirement crisis. Last November, Money.com reported that the average American 401(k) balance was estimated to be $84,300, up from $75,000 a year before.

Well, like the man says, that won’t pay the milk bill. Not for long, anyway.

As Baby Boomers retire in the next decade, many without enough savings, they will be forced to continue working wherever they can or lower their standard of living. Possibly both. Here in Florida, we already see many retirement age individuals laboring in low-paying jobs to supplement their incomes.

Many of the soon-to-be or currently retired do indeed have significant retirement savings and investment accounts. That said, some desire and/or need to supplement their incomes from Social Security and pensions.

One way to do this is by generating income from dividends and coupons from individual securities in their investment accounts. For those with really significant savings and investments, these dividend/yield payouts can often allow them to pay for their annual living expenses without snacking on their principal. In other words, their investment accounts can keep growing, given accommodative markets and prudent management, and they can use their dividends and yields to live without drawing down their balance.

These dividends, when laddered properly, can provide dependable, monthly income “paychecks.” These monthly “paychecks” can be arranged to flow directly into a person’s checking or savings account on the same day each month. So it’s like the retired individual is still in the workforce and still receiving a monthly paycheck, only he need not rise early, fight traffic and report to the boss. What could be nicer?

Now, there’s no guarantee that the individual’s principal balance will continue to grow. If the market hits a downturn, which happens periodically, the investor’s balance may drop. But one of the reassuring things about investing in dividend payers is that the investor continues to get paid on a systematic basis. 

Complete retirement is a relatively recent concept. But an understanding of the history of retirement might reveal that the crisis we face today is not unprecedented. Next week, we’ll take a look at the history of retirement.

Margaret R. McDowell, ChFC, AIF, is the founder and principal of Arbor Wealth Management, LLC, a fee-only, fiduciary registered investment advisory firm located near Sandestin (www.arborwealth.net — 850-608-6121).