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Imagine an investment that offers you a predictable, consistent income that rises over time. One that, while not guaranteed, is reliable and has been used by countless others to generate income during retirement.
What is the source of this idyllic income stream? Dividends. More specifically, dividends from publicly traded companies or mutual funds that own them.
To learn more about what a dividend is, click here.
If you ate cereal for breakfast, drank a soft drink at lunch, and drove to the store to pick up a few things on your way home from work, odds you consumed several products that were made by companies that have been distributing cash to shareholders via dividends for many years.
Dividends might not be the sexiest investment you will ever own, but they should play a vital role in your retirement income plan.
Below are 3 big reasons why dividends should be part of your retirement income plan:
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Roth IRAs were created 20 years ago to give investors a way to invest for retirement that allowed for tax-free distributions after age 59 ½.
But they came with a catch.
These new IRAs were to be funded with after-tax contributions. Unlike traditional, tax-deductible IRAs and workplace retirement plans like 401(k) accounts, contributions to Roth IRAs are not tax deductible.
Since then, investors have debated whether it’s best to fund a Roth IRA or a traditional, tax-deductible IRA. Strong arguments can be made for both, but most financial professionals agree: whenever possible, the Roth IRA should be part of your retirement income plan.
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This January marks the 20th anniversary of the Roth IRA. First made available to investors in January of 1998, a Roth IRA is an individual retirement account funded with after-tax dollars that provides tax-free growth and income for retirement.
Because Roth IRAs are such an important part of many people’s retirement income plan, I have decided to make 2018 The Year of The Roth.