2 star stocks for your ASX retirement portfolio

Coles Group Ltd (ASX:COL) and this ASX share could be great options for a retirement portfolio in 2021 instead of term deposits…

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If you're trying to earn an income in retirement, it has become close to impossible with term deposits.

Why not term deposits?

Due to interest rate cuts, term deposits are now offering some of the lowest rates we've ever seen.

For example, Commonwealth Bank of Australia (ASX: CBA) will provide investors with a 0.55% per annum interest rate on term deposits of up to $2 million.

This means that if you invested $2 million into one of the bank's term deposits, you would be earning interest of just $11,000 each year.

As a comparison, prior to COVID-19, the Australian share market was offering investors an average yield of approximately 4%.

Which means that the same $2 million invested into the share market would have yielded $80,000 in dividends. That's a difference of $69,000.

In light of this, the share market arguably remains the best place to invest money to generate a passive income while in retirement.

But which shares should you buy?

There are a large number to choose from on the Australian share market, but two shares that could be great options according to Goldman Sachs are Coles Group Ltd (ASX: COL) and Telstra Corporation Ltd (ASX: TLS).

This is due partly to their defensive qualities, generous yields, and attractive valuations.

In respect to Coles, Goldman Sachs is positive on the company and has a buy rating and $20.50 price target on the supermarket operator's shares.

It is forecasting a fully franked 64 cents per share dividend in FY 2021. Based on the current Coles share price of $18.47, this represents a 3.5% forward yield.

As for Telstra, Goldman Sachs has a buy rating and $3.60 price target on the telco giant's shares. It is also forecasting a 16 cents per share fully franked dividend in FY 2021 and beyond.

Based on the current Telstra share price of $3.01, this would provide investors with a 5.3% dividend yield.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Limited. The Motley Fool Australia owns shares of COLESGROUP DEF SET. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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