National Australia Bank Ltd. (ASX: NAB) shares, Washington H. Soul Pattinson & Co. Ltd (ASX: SOL) shares and Flight Centre Travel Group Ltd (ASX: FLT) shares pay fully franked dividends to shareholders.
Ugh, retirement
When people ask me for advice on shares, they are usually in their 20's or 50's. At these points of our 'financial life cycles' — as a professional would put it — we are more likely to consider investing. In our 20's, most people have just started working and saving money.
By age 50 the house is nearly paid off and the kids are doing their own thing, so once again it is time to save and invest. Importantly, it's also one of the best times to plan for retirement. Obviously, you can never have enough. But even if you are starting from scratch, it's never too late to start investing and building your nest egg.
Remember, if you are in your 50's, chances are, you will live for many years beyond retirement at 65. You may even work to a much older age.
65 minus 50 = a long-term investment
15 years is a long time, and an ideal horizon to have your money invested in the sharemarket. According to Vanguard, the Aussie sharemarket has returned an average of 9.8% per year since 1970. In 15 years, that level of return can work wonders for your retirement savings.
For example, let's imagine you are 50, want to retire at 65, have current savings of $50,000 (either in super or in a retirement account) and can contribute $200 a week — and keep it there.
As can be seen in the chart above, excluding taxes and inflation, your retirement could be funded for many years after you retire, if you start investing for your future today.
Keep in mind, these assumptions were made:
- You want $40,000 per year in retirement
- Your money after retirement makes a 4% per year return
- Your money before retirement makes a 9.8% per year return
Of course, it's important to acknowledge the risks in the strategy. After all, there is no guarantee that future returns will be 9.8% per year. Far from it, in fact. No one knows what will happen with certainty. Heck, you might even 'beat the market' and do better than 9.8% (although it is unlikely).
However, as far as I can tell, the sharemarket is most likely to be the best place to park retirement funds over the next 15 years.
Indeed, if I were seeking tax-effective dividend income and modest growth, I would have these three ASX shares on my watchlist:
- NAB: NAB is Australia's fourth-largest bank, focused on business banking. It is forecast to pay a 5.7% fully franked dividend in the next year.
- Washington H Soul Pattinson: WHSP is a conglomerate business, owning big chunks of other Australian businesses, like Brickworks Limited (ASX: BKW) and TPG Telecom Ltd (ASX: TPM).
- Flight Centre Travel Group: Shares in Australia's largest travel agent are arguably riskier than the other companies on this list. However, the company has an impressive track record of growth and pays a robust dividend to shareholders.
Foolish Takeaway
It's never too late to start saving and investing for retirement. It can be daunting, but you can start investing in Aussie shares with as little as $500.
