Approaching retirement can be a scary time. There's a lack of active income to worry about for one thing. But there's also the pressure of choosing the shares that will provide the passive income to fund said retirement. So who better to turn to for advice for this transition than the legendary investor Warren Buffett?
Not that Warren Buffett knows too much about retirement. Although the man is now 92 years old, he is still very much not retired and remains chair and CEO of the company he has run for more than six decades, Berkshire Hathaway Inc (NYSE: BRK.A)(NYSE: BRK.B).
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Some Buffett wisdom for a pending retirement
And Buffett knows a thing or two about obtaining a growing passive income. He bought shares in Coca-Cola Co (NYSE: KO) back in 1988. Coca-Cola is a well-known dividend share over in the United States.
But, as our Fool colleagues over in the US point out, such was Buffett's prowess in finding the right price, he now enjoys a yield on cost of 54% every year.
So this tells us that Buffett only invests in shares that he feels comfortable holding for a generation or longer. Why Coca-Cola? Buffett's love of what he calls an economic moat is probably why. And Coke arguably has more than one. There'd be few people on the planet who wouldn't know what a Coke is for one. But, as usual, Buffett puts it best:
If you gave me $100 billion and said take away the soft drink leadership of Coca-Cola in the world, I'd give it back to you and say it can't be done.
But Buffett also tells us that it's ok not to go chasing individual shares for an investment portfolio, even a retirement one.
He once said this on index investing:
If you invest in a very low cost index find – where you don't put the money in at once, but average in over 10 years – you'll do better than 90% of the people who started investing at the same time.
So that's the two takeaways we can take from Buffett for a healthy retirement. Buy the best companies at the right price. And if you don't know how, stick with a low-cost index fund.
