Americans aren't nearly as prepared for retirement as they should be.
In fact, nearly half of Americans have no retirement account savings at all, according to a recent report from the Economic Policy Institute.
Even more concerning, less than 13% of Americans have pensions, compared to 38% in 1992.
So how will seniors cope?
Many turn to dividend stocks. Dividends are a way for companies to reward shareholders for owning the stock, usually in the form of a cash payment. And retirees often use these dividends as extra income, spending the payments as they come in.
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But we like another investment tactic better...
We're talking about DRIPs, or "dividend reinvestment programs."
DRIPs use the dividend payments you collect from a company to automatically buy more shares instead of giving you cash - taking money you probably wouldn't miss and using it to create incredible wealth over time.
For example, if you had invested $10,000 in Johnson & Johnson (NYSE: JNJ) stock on Jan. 1, 1995, and kept the dividends for yourself, you'd be sitting on $98,334 today.
That's not bad.
But if you had reinvested the dividends, your investment would now be worth $131,091!
That means that failing to reinvest dividends would be leaving $32,757 on the table - 327% of your original investment.
More than 1,100 companies offer DRIPs. To find out if a company offers a DRIP program, all you have to do is check out its website or, if you want a more comprehensive list, go to Computershare.com.
There you'll find A-list names like American Express Co. (NYSE: AXP), Johnson & Johnson (NYSE: JNJ), The Coca-Cola Co. (NYSE: KO), and Lockheed Martin Corp. (NYSE: LMT), just to name a few.
But before you start investing, you need to know how DRIPS work - and decide if they are right for your portfolio.
Watch the short video below...
Here's How DRIPs Work
Up Next
DRIPs are an underused but highly valuable strategy to grow your wealth over time.
But Money Morning Chief Investment Strategist Keith Fitz-Gerald has been researching even more aggressive income potential.
He's found a special class of investments he calls "26(f) programs," which give investors the opportunity to tap into huge monthly income - $2,000... $5,000... or more - every month for the rest of their lives.
Click here to learn how it works...
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