Why You Should Invest Your Money Like a Retiree

Buy the stocks old people own

“Blind faith in your leaders, or in anything, will get you killed” — Bruce Springsteen

We’re in the middle of a retirement crisis. It’s serious.

• Fifty-five percent of baby boomers have no retirement savings. Of those who do, 28% have less than $100,000.
• Half of Generation X has no retirement savings.
• Fifty-five percent of millennials don’t have a retirement account. Of the 40% who do, nearly half aren’t “actively contributing to it.”

As a leisurely stroll through my Medium article history shows, I don’t have much confidence in the prevailing advice from the retirement industry. That’s because they’re offering essentially the same guidance today they have been giving for decades.

We’re not our parents. We’re going to work and — presumably — live longer.

Our work will not break our backs. It’s increasingly white collar, remote, and freelance.

We budget differently. We save differently. We have different priorities.

You’re probably thinking I’m going against the title of my article. Not so.

The one piece of advice that works for retirees makes perfect sense for the newest and youngest investors. In fact, this one, evergreen piece of advice stands the test of time. While we earn, spend, and save money differently for different reasons and on distinct timelines, we should mimic the way old people invest in the stock market.

Many individuals near, at, or in retirement take a defensive stance, investing in blue chip, dividend stocks that generate income and aim to preserve capital.

If you’re young you should do exactly the same thing.

It’s the only way to invest.

We teach young investors to do the opposite.

Retirement experts — almost to a person — suggest a more aggressive style of investing when you’re young. One that eschews income-focused stocks for growth stocks.

That’s bad advice. Even dangerous. But we have a scary blind faith in it.

Aggressive Investing Is Unnecessary

Aggressive investing is tantamount to speculation.

We can argue about that statement all day, however, if your goal is to build wealth over time, it’s not necessary to be an aggressive investor. If you want to be aggressive, set aside your Vegas money for that.

If you want to be an investor with long-term goals to hit, buy the stocks old people buy — blue chips that pay dividends and companies on the road to becoming blue chips.

Old People Stocks Are Better Stocks

3M Company. Colgate Palmolive. Coca-Cola. Johnson & Johnson. Procter & Gamble. Hormel. These are all blue chip stocks with insanely long histories of raising their dividends.

Old men and women hold these stocks in their portfolios. They’re retiree stocks. That’s the prevailing retirement industry ethos. Shift into these names as you near retirement. Be more aggressive when you’re young.

But why?

Apple will soon be a blue chip. Target pretty much already is. If you’re young, you can mix in these names. Companies that are part of your everyday life.

But make sure the stocks you buy not only pay dividends, but have a history of increasing dividends.

Every company I named here is a dividend aristocrat — meaning it has increased its dividend payment annually for at least 25 consecutive years. Apple has about 17 years to go, but it’s well on its way.

You Need The Benefit Of Time

Young people should be buying these stocks — not messing around with high flyers that don’t pay dividends or penny stocks on Robinhood.

These stocks pay you to own them via their quarterly dividend distributions. When that dividend payment hits your brokerage account, you have the option to reinvest it in more shares of stock. Do that, alongside regular incremental contributions with new money and you’ll build wealth — passive income effectively — over time.

Why would you wait until you’re 50, 60, or 70, to start investing in these income-producing stocks? It doesn’t make any sense.

It takes time to realize the magic of dividend reinvestment.

You need to start as early as possible.

This article is for informational purposes only. It should not be considered Financial or Legal Advice. Not all information will be accurate. Consult a financial professional before making any significant financial decisions.