No savings at 50? I’d buy high-yield dividend stocks to retire on a passive income

Now could be an opportune moment to start investing in dividend stocks.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Buying dividend stocks today may seem to be a bad idea. After all, the stock market has experienced a severe decline in recent weeks which could continue over the short run.

However, even at age 50 you are likely to have a long time horizon until you decide to retire. As such, there is likely to be sufficient time for your stocks to recover from their present lows.

Through buying undervalued stocks today, you could generate high returns which lead to a growing passive income in retirement.

Short-term risks

In the coming months, the stock market looks set to experience further challenges. The risks from coronavirus may persist, which could lead to challenging trading conditions for a wide range of businesses and sectors. This may contribute to weak investor sentiment that produces disappointing returns for investors.

However, most investors are likely to have a number of years left of working until they decide to retire. For example, at age 50 you may have 15 years or more until you cease working. This is very likely to afford stocks the time they require to recover from their present woes. In the past, bear markets have often lasted for a number of months, or even a few years.

As such, there is a high chance of a bull market returning stock prices to higher levels prior to your retirement. This may mean that buying stocks now enables you to benefit from their future recovery.

Return potential

Stocks may have fallen in recent months, but their long-term performance continues to be highly attractive. Over a long time period, the stock market is likely to produce significantly higher returns than other mainstream assets. For example, low interest rates mean that cash and bonds may fail to produce positive after-inflation returns.

Furthermore, buying stocks while they trade at a low ebb has historically been a means by which investors such as Warren Buffett have generated high returns. As with any asset, buying it while it is trading at a lower price level can provide greater scope for high returns. And, while news flow may have been highly negative of late, the stock market’s historic performance suggests that a recovery is highly likely over the coming years. This could provide a catalyst for your retirement nest egg.

Risks

Reducing the risk of loss from your portfolio can be achieved through diversification. Some companies may not make it through the current difficulties, so if you hold a wide range of businesses then you will be less reliant on a small number of stocks to fund your retirement.

Similarly, buying stocks with low leverage, affordable dividends and a sound strategy can maximise your chances of generating high returns in the long run. At age 50, there is still time to build a portfolio from which you can enjoy a growing passive income in older age. The recent fall in the stock market could make now the right time to start that process.

More on Retirement Articles

A senior man and his wife holding hands walking up a hill on a footpath looking away from the camera at the view. The fishing village of Polperro is behind them.
Investing Articles

Here’s how you could build a second income in 2026 with £10 a day!

Discover how investing in the stock market can deliver a huge second income -- and a top fund Royston Wild…

Read more »

Content white businesswoman being congratulated by colleagues at her retirement party
Investing Articles

I asked ChatGPT to find 3 shares for a brand new SIPP, and it picked…

Many UK investors will have an ISA or SIPP on their planning lists for 2026, while others seek new additions…

Read more »

A senior group of friends enjoying rowing on the River Derwent
Retirement Articles

How much do you need in an ISA to earn a £5,000 monthly passive income?

Holding dividend shares in a Stocks and Shares ISA can deliver a robust long-term passive income. Consider this strategy for…

Read more »

Portrait Of Senior Couple Climbing Hill On Hike Through Countryside In Lake District UK Together
Investing Articles

How much do you need in a Stocks & Shares ISA for a £3,333 monthly passive income?

Buying dividend stocks can supercharge your passive income from a Stocks and Shares ISA. Consider this investing strategy for retirement…

Read more »

Woman riding her old fashioned bicycle along the Beach Esplanade at Aberdeen, Scotland.
Investing Articles

Here’s how a 10-share SIPP could combine both growth and income opportunities!

Juggling the prospects of growth and dividend income within one SIPP can take some effort. Our writer shares his thoughts…

Read more »

A mature adult sitting by a fireplace in a living room at home. She is wearing a yellow cardigan and spectacles.
Investing Articles

Not using a SIPP? Here’s how much money you could be missing out on…

Over the last 25 years, some smart SIPP investors have made almost £3.5m by putting aside just £500 a month!…

Read more »

Friends and sisters exploring the outdoors together in Cornwall. They are standing with their arms around each other at the coast.
Investing Articles

How much do you need in an ISA to triple the 2026 State Pension?

Even with a 4.8% jump, the UK State Pension's still not enough for a comfortable retirement. Here's how big an…

Read more »

A senior man and his wife holding hands walking up a hill on a footpath looking away from the camera at the view. The fishing village of Polperro is behind them.
Investing Articles

Not using a Stocks and Shares ISA? You could be missing out on a wealthy retirement!

With significantly higher returns than the Cash ISA, Royston Wild explains how a Stocks and Shares ISA can supercharge your…

Read more »