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422 Stocks to Supplement Your Social Security Income

Don't assume that Social Security will provide most or all of what you need to live on in retirement: The average monthly retirement benefit was recently $1,517 -- about $18,200 on an annual basis. Of course, if you earned more than average during your working years, you can expect to collect more, but not that much more. The maximum benefit for someone retiring at age 62 in 2020 is about $2,265 ($27,180 annually), and for someone retiring at age 70, it's $3,790 ($45,480 for the year).

Clearly, most of us will need or want more income in retirement than that. There are lots of ways to increase your retirement income, and making good use of the stock market is one of them. Here are some stocks to consider.

Image source: Getty Images.

422 stocks to supplement your Social Security income

Let's start with an easy income-generating approach: Dividends. Not every company pays a dividend, but gobs of them do, and it's usually the more established, stable companies doing so. After all, ideally, you want your business to offer fairly dependable earnings before you commit to paying shareholders a dividend.

You can study and choose great dividend-paying stocks in which to invest, and we'll get to that shortly, but doing so does require some effort and skill. A much simpler solution is just opting for a low-fee, broad-market index fund, such as one that tracks the S&P 500. The SPDR S&P 500 ETF (SPY), an exchange-traded fund (ETF), fits that bill. Its fees are very low (0.09% annually, or about $9 on a $10,000 investment), and it will instantly have you invested in 500 of the biggest companies in America, with lots of familiar names, such as Apple, Amazon.com, Johnson & Johnson, Visa, Lowe's, Walt Disney, Netflix, Walmart, Coca-Cola, Costco, and about 490 others.

Index funds tracking the S&P 500 also offer dividends: As of last year, some 422 of the 500 components of the S&P 500 paid dividends, per Barrons. Altogether, the index's dividend yield was recently about 1.85%. The table below shows how much dividend income you can expect with various sums socked away in the S&P 500:

Investment in S&P 500 Index Fund

Annual Income with 1.85% Yield

Monthly Equivalent

$100,000

$1,850

$154

$250,000

$4,625

$385

$500,000

$9,250

$771

$750,000

$13,875

$1,156

$1 million

$18,500

$1,542

Source: Calculations by author.

Clearly, you can supplement your Social Security income substantially if you can park meaningful sums in index funds. Note, too, that dividends tend to be increased over time, which will also be welcome in retirement. And if the dividend income from your index funds isn't sufficient, you may simply sell off some shares each year.

Individual dividend-paying stocks

If you're willing to put in more time and effort studying companies and choosing some dividend payers in which to invest, you may be able to enjoy an overall dividend yield greater than that of the S&P 500. For example, check out the familiar names below, and their recent dividend yields:

Stock

Recent Dividend Yield

AT&T

7.1%

Chevron

6.5%

Philip Morris International

5.8%

Walgreens Boots Alliance

5.3%

MetLife

4.8%

Verizon Communications

4.2%

3M

3.6%

CVS Health

3.4%

General Mills

3.3%

Discover Financial Services

3.2%

Bristol-Myers Squibb

3.1%

PepsiCo

3%

Source: Yahoo! Financial.

It's worth noting that many yields are uncommonly high these days because their corresponding stock prices are depressed, due to our weird pandemic economy or to other factors. A dividend yield, after all, is the result of dividing a company's annual dividend sum by its recent stock price -- so if the stock price falls, the yield rises. When times get tough, some companies will reduce, suspend, or eliminate their payouts -- though they'll try hard not to do that.

If you invested in some dividend payers such as the ones above and your overall average dividend yield was, say, 3.7%, you'd collect twice the sums in the first table above. With $400,000 invested and an average yield of 4%, you'd be looking at $16,000 annually, or about $1,333 per month -- a rather meaningful addition to your Social Security income.

However you do it, make sure that you're setting yourself up for sufficient income in retirement.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Selena Maranjian owns shares of Amazon, Apple, AT&T, Costco Wholesale, Johnson & Johnson, Netflix, Verizon Communications, and Walt Disney. The Motley Fool owns shares of and recommends Amazon, Apple, Bristol Myers Squibb, Netflix, Visa, and Walt Disney. The Motley Fool recommends 3M, Costco Wholesale, CVS Health, Johnson & Johnson, Lowe's, and Verizon Communications and recommends the following options: long January 2022 $1920 calls on Amazon, long January 2021 $60 calls on Walt Disney, short October 2020 $125 calls on Walt Disney, and short January 2022 $1940 calls on Amazon. The Motley Fool has a disclosure policy.


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