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Which ASX dividend shares are best for SMSF retirees?

If you’re retired or planning to depart your working life in the near future, chances are your attitudes toward investing have changed over the past decade.

Suddenly your nest egg is looking a lot more fragile now that the ever-reliable stream of supplementary income is about to try up.

The thrill of finding tomorrow’s stock market winner is perhaps now not as appealing, replaced instead with the urge to find stocks that can keep your golden years ticking away with the least stress.

So how do you find the best stocks for your self-managed super fund (SMSF)?

Well, a relentless focus on dividend income is your best friend. Stocks aren’t much good in a retirement portfolio if they can’t throw off cash flow after all.

But most people would tell you that.

I think the best strategy for an SMSF retiree is to seek a balanced income portfolio – and carefully balanced at that.

I think it is a grave mistake to fill a dividend portfolio with simply the highest-yielding stocks. If your retirement is built on a house of the four ASX banks plus a few other big-yielding shares like AGL Energy Ltd (ASX: AGL), you are taking a big risk.

All retirees have different time horizons, but I’m assuming that you’d want your retirement to last at least two fun-filled decades (hopefully even more!). That means you have to look beyond raw yield and consider what the world may look like in 2040 or even 2050.

I’d be willing to put money on Commonwealth Bank of Australia (ASX: CBA) being around – but I’m not so keen to wager on its 5.5% dividend yield keeping up – you never know what the world of neo-banks might throw at us.

So I think the ‘perfect balance’ is a mix of big yielding shares together with companies that offer a clear dividend growth trajectory.

Take Ramsay Health Care Limited (ASX: RHC). With a current starting yield of 2.27%, it’s not going to make your yield-hungry eyes light up. But they might if you knew that Ramsay has delivered a shareholder pay rise every year this century so far. Throw in a business with healthy tailwinds, and you have a stock that is (in my opinion) perfect for a retiree portfolio. There are more ASX companies like this out there, and you may want to throw some into your SMSF mix.

Foolish takeaway

It’s all well and good to have big yielders like CommBank in your SMSF, but I think balance is the key to a long and successful retirement income. Diversity across sectors and stocks is the best thing you can do for your future self, so why not take a look at your portfolio and imagine where it may be in 10 or 20 years’ time.

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Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Ramsay Health Care Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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