A recent Northwestern Mutual survey found that Americans believe they'll need $1.46 million to retire comfortably. But even if you accumulate that much in retirement accounts, your money isn't guaranteed to last throughout retirement. Given this, it's no surprise that one of Americans' biggest fears is outliving their savings.
However, the good news is there's one simple move you can make to reduce the odds of running out of money.
Image source: Getty Images.
Create a recurring stream of passive income
Building a healthy retirement nest egg is essential, but certain events, such as cost-of-living increases and unexpected expenses, could quickly shrink your savings. In addition to savings, you'll want to consider generating a recurring income stream to avoid constantly withdrawing large sums of money from your retirement pot to stay afloat.
One of the most attractive streams of income for retirees is dividend income. You don't have to lift a finger to earn it and can create a dividend portfolio that pays you enough to cover some or all of your bills in retirement. As soon as you set up your dividend system, the money keeps rolling in every month or quarter, as long as the company's board of directors continues to declare a dividend.
You can also enjoy tax advantages, such as tax-free dividend income in a Roth IRA, so you can further stretch your retirement savings. If you build a dividend portfolio in a taxable brokerage account, there will be no limits to how much you can contribute to the account. You'll also get special tax rates if you have qualified dividends in your portfolio.
Aim for a well-diversified portfolio of passive income and keep your expenses under control to avoid financial shocks if things don't go as planned. And remember that companies can cut or eliminate their dividends at any time.
By creating your own dividend machine now, you won't have to rely solely on Social Security benefits and savings. You'll have the flexibility to create the life you've always dreamed of and can use your passive income to fund your lifestyle.
