Welcome back, my fellow Old Ladies in Training!

OLT here, and today we’re going to chat about one of the most tried-and-true passive income strategies: dividend investing.

You know the drill, we’re on a quest to fund our champagne dreams during our golden years, so let’s get down to business and explore the world of dividend investing together.

Are Your Funds Working for You?

If you’re like most workers, you have put aside some money in a 401(k) or similar throughout your working years. You’ve probably changed jobs throughout your career and have a couple of IRA accounts from 401(k) rollovers.

Maybe you asked your uncle or cousin or the HR person at the job your were leaving, (Worst person to ask, BTW!) what to do with the funds, and someone told you to diversify, so you bought a bunch of funds similar to the ones you had in the 401K and you just parked it there. 

What if I told you, there are things you could be doing right now, that can make a huge difference to your future retirement income? Even if most of your funds are still tied up in your 401k!

Getting Control of Your Funds

The funds offered for 401(k)s are not always the best for investors. They incur a lot of fees that eat into your returns. Also, someone in HR probably told you to diversify, and you’ve been sitting in 25% bonds since you were 25. Bad advice!

If you’re no longer employed there, you’re no longer receiving a match, so you want to get your money out of that 401K and into an IRA where you have more control as soon as possible.

You Might Want to Move Some of Your Funds to an IRA

Even if you’re still employed,  you might be able to take what is called an in-service distribution, (in-service means that you still work for the company) at age 59 1/2 without incurring a penalty. Some plans allow this at an early age, sometimes 55, for some portions of your funds, like the employer’s contribution or profit-sharing contributions. Check with your plan administrator to see if this is an option available to you.

If so, rolling some of your 401k funds into an IRA where you have more control, might be a good option for you.

You can continue to contribute and receive your match, even if you’re pulled the bulk of your funds from the plan. 

Choosing Your Investments

Choosing the stocks to purchase can be daunting, but it doesn’t have to be that complicated. Look at companies that you are familiar with, whose products you use and believe in. Companies that are solid that you believe will be around long term, that also have potential for growth. 

You want to look for profitable companies. Tech companies and other startups are not paying dividends. They are servicing debt.  There are always opportunities in tech, but that’s not what we seek for this purpose.

Focus On Dividends

Look for dividend growth: Instead of solely focusing on high dividend yields, keep an eye out for companies that have a history of increasing their dividend payouts over time. This way, you can enjoy the benefits of a growing income stream and make the most of the power of compounding.

Reinvest Your Dividends

One of the best strategies for long-term wealth accumulation is to reinvest your dividends, called “DRIP”. By doing so, you’ll be purchasing more shares of the stock, which will, in turn, generate even more dividends. It’s a virtuous cycle that can help you grow your nest egg over time.

Do this if you have your stocks in an IRA or other tax-advantaged account that you’re not planning to pull money from in the short term. Once retired, it’s easy to switch off DRIP and start getting cash deposits for your dividends to create a steady stream of retirement income.

Stay informed: Knowledge is power, and staying up to date with the latest news and trends in the financial world can help you make better investment decisions. Don’t hesitate to research, read, and consult with a financial advisor to ensure you’re making well-informed choices.

Be patient: Dividend investing is a long game. Don’t expect to see massive returns overnight. Instead, focus on building a solid portfolio and let the power of compounding work its magic. In the words of the wise Warren Buffett, “Someone’s sitting in the shade today because someone planted a tree a long time ago.”

So, ladies, there you have it – a beginner’s guide to diving into the world of dividend investing. With some patience, research, and a little bit of luck, we’ll be sippin’ on those mimosas in no time. 

If you want to read more on this subject, you might be interested in my article Maximize Your Retirement Funds.

Share in the comments which fabulous Old Lady in Training you think would ace the dividend investing game and keep the champagne flowing!

To our fabulous future fortunes, OLT