How to Turn $50,000 Savings Into a Generous Nest Egg in 2 Decades

Build a generous nest egg in 20 years by investing your accumulated savings in Dividend Aristocrats and holding them in an RRSP or TFSA for tax-free money growth.

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A golden egg in a nest

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A nest egg refers to an amount one would have upon retirement, and the fund comprises accumulated savings plus a growth component, which is investing. Future retirees with $50,000 savings today can build a generous nest egg, provided the time horizon is at least two decades.

Stock investing is one of the easiest ways to build long-term wealth. You can take advantage of the power of dividends by investing in Dividend Aristocrats like Pembina Pipeline (TSX:PPL) and Canadian Utilities (TSX:CU). There will be periods of volatility, but you can expect the payouts to keep coming.

The proven strategy to grow your money faster is to refrain from touching the quarterly dividends but reinvesting them every time. Also, consider holding the dividend stocks in a tax-advantaged investment account so that money growth is tax free.

Fund allocation

The table below shows the suggested allocation or number of shares for your $50,000 savings if invested today:

CompanyPriceYieldNumber of SharesInvestment
PPL$42.626.17%586$24,975.32
CU$35.534.88%704$25,013.12

Assuming the yields remain constant in the next 20 years, your capital could nearly triple to $147,574.62 by 2043. The example illustrates the power of compounding when you reinvest the dividends four times a year.

Growth opportunities ahead

Pembina Pipeline reported a record financial year in 2022 and obtained environmental approval recently for the proposed floating liquified natural gas facility or Cedar LNG project. The $23.45 billion energy transportation and midstream services company had a record financial year in 2023.

In the 12 months that ended December 31, 2022, earnings jumped 139.2% year over year to $2.97 billion. Pembina’s adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) also rose 9% of $3.746 billion versus 2021 due to growing volumes on key systems and strong performance from the marketing business.

Furthermore, Pembina and TC Energy entered a carbon-sequestration evaluation agreement with the Government of Alberta, as the province moves into the next phase of its carbon-capture utilization and storage process. Management finds it a fantastic opportunity to lead the way in reducing emissions and developing new technologies.

Dividend King

Canadian Utilities is a low-volatile asset and a Dividend King for increasing its dividends for 51 consecutive years. The core businesses of this $9.59 billion diversified global company are core utilities, energy infrastructure, and retail energy. However, most of its capital expenditures are in regulated utilities.

Innovation, growth, and financial strength provide the foundation for CU, and management believes long-term success depends on its ability to expand into new markets. The strategy is to protect the core utility assets and invest in activities that will advance the energy transition and ensure long-term resiliency.

Management will keep driving cash flow and earnings to improve financial strength and growth capacity.

Purpose of a nest egg

The purpose of building a substantial nest egg is for you to live comfortably in retirement. If you have accumulated savings, you can double or triple it in two decades with blue-chip stocks like Pembina Pipeline and Canadian Utilities. The dividend earnings during the sunset years can also help you cope with inflation.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Christopher Liew has no position in any of the stocks mentioned. The Motley Fool recommends Pembina Pipeline. The Motley Fool has a disclosure policy.

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