Many American workers struggle to manage everyday expenses while also making efforts to secure their financial future through saving and investing for retirement.
Jean Chatzky, a former financial editor for NBC’s Today Show and the founder of HerMoney, delivers a warning and another strong message for those preparing for retirement.
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She underscores the reality that Social Security payments were never intended to serve as a retiree’s sole source of income.
With an average monthly benefit of approximately $1,900 — totaling around $23,000 annually — most people find this amount insufficient for the comfortable retirement they envision.
To build a more secure financial future, workers commonly invest in employer-sponsored 401(k) plans, often benefiting from their company’s matching contributions.
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Chatzky also stresses the importance of tax-advantaged savings through a Roth IRA.
Traditional IRA contributions are made on a pre-tax basis, meaning taxes are owed when funds are withdrawn in retirement. By contrast, a Roth IRA requires contributions to be taxed up front, allowing retirees to make tax-free withdrawals later in life.
With these details in already in mind, Chatzky offers some insights into strategies for navigating Social Security benefits and additional sources of retirement income.
A retired couple is seen holding hands and walking on a beach. Former NBC Today Show financial editor Jean Chatzky discusses the best age to claim Social Security benefits and dividend stocks for retirement income.
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Jean Chatzky has a warning about claiming Social Security
First, Chatzky warns people about not collecting Social Security monthly payments too early.
For people who are single and anticipate a long retirement, postponing withdrawals until the age of 70 can be a strategic move to maximize benefits, she explains.
For couples, she advises that the higher-earning partner should delay distributions if at least one of them expects to live longer, ensuring greater financial security.
Chatzky highlights the reality that many people continue working while receiving Social Security benefits.
Some choose to remain in the workforce out of necessity, relying on additional income to meet financial obligations. Others like the fact that work keeps them busy and engaged in projects during retirement.
More on retirement:
Scott Galloway offers bold opinion on Social Security Dave Ramsey bluntly warns Americans about retirement Tony Robbins sends strong message on 401(k)s
In a recent HerMoney Podcast, Chatzky discussed a good way to receive more income during retirement: investing in dividend stocks.
She engaged in this conversation with author Van Leeuwen Harrington, who wrote the new book Dividend Investing: Dependable Income to Navigate All Market Environments.
Related: Dave Ramsey has blunt words on 401(k)s, Roth IRAs now
Jean Chatzky examines dividend stock investing for retirement income
Chatzky talked about the basics of dividend investing with Van Leeuwen Harrington, who explained the difference between dividend growth investing and dividend income investing.
“Dividend growth investing are companies like Microsoft and Apple who pay a dividend, but it’s very, very tiny,” she said. “So, if you were to buy a share of those stocks, your dividend yield would be 0.01 or 0.02%.”
“Then there’s dividend income investing, and that’s what I focus on,” Van Leeuwen Harrington continued. “Dividend income investing is where you can create a portfolio, and the dividend income that the stocks pay out creates a substantial income stream.”
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She provided a hypothetical example.
“If you invest in a stock that has a price of a hundred dollars and it has a 5% dividend yield, then it’s giving you $5 a year of income,” she said. “And the dividend is consistent, so the share price can go up, down, and sideways, but the dividend is consistent, particularly in U.S. stocks.”
Chatzky suggested that there are different types of investors, including value investors, growth investors and dividend income investors. She asked Van Leeuwen Harrington how one determines which type they are.
“It’s interesting because a huge amount of my clients aren’t actually the kind of people who need dividends or need dividend income, but it makes them feel good,” she said. “They are risk-averse humans, and they don’t care that they missed out on a plus 26% return last year in the stock market. That rollercoaster makes them queasy.”
“What makes them feel good is seeing cash income deposited into their brokerage account on a monthly basis. Collectively, you get a little bit of income each month from lots of different companies, and that makes you feel good.”
