4 Stocks For Baby Boomers As They Approach Retirement

For people who are approaching their retirement, investing can be bit of a challenge.

Yes, we are talking about baby boomers, the generation born between 1946 and 1964 per the U.S. Census Bureau. This generation is one of the largest in the history of the United States, currently estimated to be 74.1 million in number and accounting for approximately 23% of the country’s population. The oldest members are now 72 years old, while the youngest are just about to turn 54.

The first baby boomer officially retired in late 2007 and since then, the number has increased to millions over the past decade, as increasing number of baby boomers continue to reach their retirement age. Over the next 15-20 years, the majority of them will have left the workforce.

But are they financially strong enough to maintain their lifestyle and meet healthcare costs post retirement?

We Don’t Think So

Per Pew Charitable Trusts’ latest report, only 13% of working baby boomers are currently covered under pension schemes. This means the majority of retirees will need to plan their retirement on their own, making it the most challenging factor for the boomers.

Furthermore, this generation is notably believed to be the most active and wealthiest group of their era. Also, baby boomers were the biggest beneficiary of the 1982-2000 secular bull market, which gave them the opportunity to make plenty of money through aggressive investment in stock markets.

Despite this, the generation has not saved enough assets due to the boomers’ excessive spending habits and luxurious lifestyle, according to a Paladin Registry report. The report states that about 60% of baby boomers have inadequate assets for post retirement survival.

Additionally, the generation is expected to have a longer life span — thanks to the advanced medical science and healthier lifestyles — which again means they need more funds for longer periods. Escalating healthcare costs is another challenge, which boomers have to face with increasing age.

Therefore, as the majority of baby boomers are still working, they need to plan their investments to maintain their living standards post retirement.

Things to Keep in Mind

In our opinion, if one has enough assets to maintain existing lifestyle and meet necessary healthcare expenses, it will be wise to play safe and invest in less risky portfolio. However, the majority of this generation does not have this liberty due to lack of adequate savings.

Therefore, they need to invest in assets, which can generate solid regular returns with minimum associated risks. Also, the return should cover the investment and inflation costs.

Obviously, baby boomers will never get that return by investing in bonds. So, which investment plan has the potential to generate regular returns and provide them the opportunity to accumulate assets for the future as well?

Investment in Blue Chip Dividend Stocks is the Best Choice

Blue chip dividend stocks boast solid financial structure and healthy underlying fundamentals, and are unperturbed by market turbulence. Such stocks are believed to be safer and more durable than an average stock. Most of these companies consistently raise dividends and are typically large in size as well.

The companies’ dominating market position, large customer base, sustainable business model, long track of profitability and strong liquidity help them offer outsized payouts or sizable yields on a regular basis, irrespective of the market direction. As a result, these stocks provide greater stability and offer continued income for investors, as well as more scope for capital appreciation.

Our Picks

We have, thus, selected four blue chip dividend stocks for baby boomers that flaunt a Zacks Rank #1 (Strong Buy) or #2 (Buy), and have a dividend yield of more than 2%. The search was also narrowed down with a VGM score of A or B. Such a score allows you to eliminate the negative aspects of stocks and select winners. All these four stocks have outperformed the S&P 500 index over the past decade.

The first stock is one of the world’s leading semiconductor companies, KLA-Tencor Corporation (NASDAQ:KLAC), which sports a Zacks Rank of 1, has a VGM Score of B and a dividend yield of 2.2%.

Our next pick is also from the tech sector — Western Digital Corporation (NASDAQ:WDC). The company sports a Zacks Rank of 1, has a VGM Score of A and a dividend yield of 2.3%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Another stock is Cummins Inc. (NYSE:CMI) , which designs, manufactures, distributes, and services diesel and natural gas engines, and engine-related component products worldwide. The stock has a Zacks Rank #2 and a VGM Score of A. Its dividend yield is 2.2%.

Our fourth selection is the home improvement retailer — Home Depot Inc. (NYSE:HD) . The stock has a Zacks Rank of 2 and a VGM Score of A. Its dividend yield is 2.2%.

Zacks’ Best Private Investment Ideas

While we are happy to share many articles like this on the website, our best recommendations and most in-depth research are not available to the public.

Starting today, for the next month, you can follow all Zacks' private buys and sells in real time. Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors.

Click here for Zacks' private trades >>