Investors: Here’s How to Make $1,000 Each Month in Retirement

Even choosing a conservative ETF can help retirees reach their dreams of achieving $1,000 in monthly passive income.

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Retirement is supposed to be a time when Canadians can enjoy themselves, stress-free. And yet the financial strains that you’ve managed all your life continue well into retirement. In fact, in many cases, they worsen! You now suddenly have no cash coming in from a job, and merely see your funds shrink lower and lower. Even with the help of government programs.

So let’s make your investments work for you instead. Retirees can make safe investments that will allow for growth, as well as monthly income. And I do mean safe. Let’s look at one option that I would consider for passive income in retirement.

A monthly dividend-paying ETF

Don’t want to do the heavy lifting of finding monthly passive income stocks? I don’t blame you. Retirement has to be stress-free, so you certainly don’t want to continuously rebalance your portfolio on high alert.

That’s why exchange-traded funds (ETF) are such a great option. And there are some high-paying monthly dividend ETFs out there. But one I really like right now is the iShares Canadian Financial Monthly Income ETF (TSX:FIE). It currently offers a 7.19% dividend yield for investors to consider. Yet shares are down 8% in the last year, offering you a solid time to get in on the stock while it’s down.

Not that it will remain down for long. The main issue for investors right now is that the ETF invests mainly in financial institutions, including other iShares ETFs. Yet these Canadian financial institutions have provisions for loan losses that will allow for a strong rebound.

Now let’s see how much you would need to invest today to reach $1,000 per month in passive income.

Invest today for $1,000

If you’re going to create $1,000 in passive income right away, it’s going to still take a significant investment in FIE stock today. Below, I’ll go over how much you would need to create a total of $12,000 per year for retirees.

COMPANYRECENT PRICENUMBER OF SHARESDIVIDENDTOTAL PAYOUTFREQUENCYTOTAL PORTFOLIO
FIE$6.6625,000$0.48$12,000monthly$166,500

That’s an enormous investment in one stock for passive income. That’s why in the next section, we’ll see how much it would take you to reach $12,000 in annual income in a decade, while investing $6,000 towards it each year after the first year.

YearShares OwnedAnnual Dividend Per ShareAnnual DividendAfter DRIP ValueAnnual ContributionYear End Shares OwnedYear End Stock PriceNew Balance
18917.00$0.48$4,269.94$63,800.72$6,000.0010406.13$6.99$72,770.08
210406.13$0.48$4,983.02$77,912.51$6,000.0011923.63$7.34$87,551.01
311923.63$0.48$5,709.68$93,434.48$6,000.0013464.98$7.71$103,812.03
413464.98$0.48$6,447.76$110,446.54$6,000.0015025.70$8.10$121,637.14
515025.70$0.48$7,195.12$129,030.57$6,000.0016601.39$8.50$141,112.43
616601.39$0.48$7,949.64$149,270.58$6,000.0018187.73$8.93$162,326.20
718187.73$0.48$8,709.27$171,252.87$6,000.0019780.54$9.37$185,369.18
819780.54$0.48$9,471.99$195,066.18$6,000.0021375.79$9.84$210,334.64
921375.79$0.48$10,235.88$220,801.94$6,000.0022969.63$10.33$237,318.68
1022969.63$0.48$10,999.10$248,554.46$6,000.0024558.41$10.85$266,420.39

Bottom line

As you can see, it would take 8,917 shares to create $1,000 in monthly income. This would mean starting your investment at $59,387.22 as of writing. Still a hefty investment, but also more than $100,000 less than investing immediately for that passive income.

What’s more, you’ll have created significant returns in that time from an investment in a safe ETF like FIE stock. You get exposure to a vast array of financial institutions and stable growth for the next decade. By then, you can just sit back and enjoy the passive income flowing in each and every month.

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 Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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