How to Invest in the Stock Market to Supplement SSI

Stock dividends provide income on top of Social Security benefits.

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When you plan your retirement income, you can combine your estimated Social Security benefits and your estimated income from stocks. The Social Security Administration provides a free benefit estimator at If your benefit won't allow you to live comfortably, you can create a stock investment plan that can provide you with additional income and some growth in the value of your portfolio. Create this plan as far in advance of retirement as possible.

Step 1

Calculate four percent of your investment portfolio. According to Dividend Growth Investor (, most investment advisers endorse the idea that you should live off of 4 percent of your portfolio per year during retirement. The acceptance of this percentage comes from a study conducted by William P. Bengen, "Determining Withdrawal Rates Using Historical Data." The study found that if you live off of 4 percent of your investment portfolio, it will replenish itself each year, and you won't lose portfolio value. cites a study by Center for Retirement Research at Boston College that shows that from 1883 to 2008, stocks averaged 7.6 percent return after inflation. That is why using 4 percent will allow for some growth and replenishment.

Step 2

Search for stocks with long-term dividend growth. Stocks that have consistently grown their dividends will be most likely to have a healthy dividend by the time you reach retirement, or if you are already retired, they will be most likely to continue paying good dividends. You can search for these by using free stock screening sites, such as Yahoo Finance at If you have an investment account with an online broker, these accounts come with a stock screener as well. You can enter a search parameter of "dividend growth" and find stocks that have steadily paid dividends.

Step 3

Select stocks that currently pay a 4 percent or higher dividend. For example, the website says the average dividend for stocks of the S&P 500 is 2.70 percent, but it lists several well-known stocks that pay above 4 percent. For example, Kraft Foods Group pays 4.37 percent. All figures are current as of December 2012.

Step 4

Invest in the dividend stocks of your choice that pay 4 percent or more. Most stocks pay dividends quarterly. Elect to have dividend payments deposited as cash into your investment account. Investment accounts allow you to keep this money in a money market account so you can earn a little interest. Your deposits will show up in your account every three months.

Step 5

Calculate your monthly cash withdrawal. Once you know how many dollars you will get a year from using 4 percent of your portfolio for income, divide that figure by 12. For example, if you know you will make $20,000 per year in dividends, divide by 12 and you find that you will have $1,666 to use each month as income. Withdraw that amount from your cash in your investment account each month.