Boss Hoggin' OUtlaw wrote:
Flagpole wrote:So, you want to generate $50,000 a year in dividends by the time you are 50? Good goal.
Some things to do along with that if you haven't already:
1) Get and stay debt free. Can have mortgage if reasonable, but all other debt needs to be attacked and slayed.
2) Have 3-6 months of expenses saved in liquid funds. Could be cash, CD, even a Money Market Fund if you watch it and don't let it drop too much. Idea is that this money is for emergencies and NOT an investment.
Flagpole, I have all these things. Can I just pump a lot of money into the Vanguard 500 Index Fund and an IRA + 401k?
Once you invest a lot of money into an index fund and it grows over the course of many years, do you just get paid & survive off the dividends?
I'm not a big fan of first entry into the market being a HUGE amount. Can scare a person away if it goes bad for a while, and consistent giving is what builds wealth over time.
You could fully fund an IRA for 2014 right now if you have the cash, and then I would pick a percentage of your income to go into the 401k. If your company doesn't have too many restrictions, you could choose an index fund, yes. I like a little more control than that and prefer the growth, aggressive growth, growth and income and international route, but you could do worse than choosing index funds.
Goal should ultimately be at least 15% of your income going to retirement accounts, so if you can't do that, you should consider working up to it. Beyond that, either pay off house, save for college or another big expense, or buy non-retirement mutual funds. Once you have ZERO debt (including a paid for house), you can start to buy individual stocks if you so choose. That's how I would go about it all.