Not having enough money for retirement is a fear that many of us have. As the average life expectancy rises, we’ll need to start saving and investing for the long term earlier than ever. If you’ve got at least five years before your expected retirement date, and you’ve got enough capital to invest, as well as the discipline to remain calm in uncertain times, then you’re ready to construct your future retirement portfolio right now.
What exactly is a “future retirement portfolio?”
It’s a retirement portfolio that you make for yourself many years prior to your actual retirement date.
There’s no need to trade on a consistent basis to enjoy a wealthy retirement; you can simply find the stocks of businesses with durable competitive advantages, and just buy them and hold on forever while they consistently return cash to your pocket in the form of dividends or distributions that will grow by leaps and bounds.
Once you finally retire, the future retirement portfolio that you’ve made for yourself years or decades prior will be ready to offer you a great deal of sustainable income that many retirees could only dream of.
But here’s the catch: you’ve got to start ASAP, and to get the full effects, you should reinvest your dividends accumulated through the years. Even if you’re retired right now, you can still improve your retirement in a decade from now, but, unlike younger investors, you probably won’t like the idea of sacrificing income today for income tomorrow, as it may not be worth it depending on your unique situation.
Canadian National Railway Company (TSX:CNR)(NYSE:CNI)
CN Rail is a top stock that I’d recommend for your future retirement portfolio. But you shouldn’t be buying it when you retire; you should be buying it right now, so the dividend has a chance to blossom to a level that will meet your income needs in the future.
The company is a dividend-growth king whose annual dividend hikes are pretty much guaranteed, whether the markets are flying or in turmoil. The management team is consistently improving its operating ratio, and that means great efficiency and more cash to support dividend raises down the road.
The rail business is unlikely to go out of business a decade from now because of technology as a disruptor. In fact, the rail business can be made even more efficient through the use of technology.
Over the last 20 years, CN Rail has grown its dividend by ~16% per year. The stock currently yields just 1.64%, but if you hold on for a decade or more, that dividend will become massive compared to the original investment! That’s an incredible amount of dividend growth, even with the Great Recession in that timespan!
Stay smart. Stay hungry. Stay Foolish.
