I’m 53 with $265,000 that I don’t need for living expenses. My goal is to retire at 62 with $90,000/year in passive income. Is that even possible? Should I focus on dividends now or growth?

Do the numbers work?

Since 1926, the stock market has produced about an average annual return of 10%, accounting for years of great performance as well as downturns. But someone nearing retirement should be cautious about going all-in on stocks in the years leading up to it.

So let’s say you’ve got $265,000 to invest today at age 53, and you’re aiming to retire at 62. While it’s OK to go heavy on stocks for, say, the next six or seven years, as retirement gets closer, it’s generally smart to scale back on stocks and shift over to assets that are more stable, like bonds.

Because of this, we can’t assume that a $265,000 investment today will generate a 10% return over the next nine years. A smarter approach is to assume something more modest, say a 7% return. If that $265,000 earns 7% in the coming nine years, it will grow to about $487,000.

So now let’s get back to that goal of $90,000 a year in passive income. If that $487,000 portfolio is your only source of assets, then frankly, $90,000 just isn’t doable.

These days, you can expect a roughly 1.27% dividend yield out of an S&P 500 portfolio. But let’s say that instead of investing in an S&P 500 ETF, you specifically assemble a portfolio that’s loaded with stocks paying notably high dividends.

Even so, an average 5% yield would be generous in that situation. And with $487,000, you’re then looking at about $24,000 in passive dividend income.

Of course, this all depends on what your definition of what passive income entails. If it includes Social Security, and you’re looking at a pretty generous monthly benefit even with a reduction for filing early, then you might get closer to $90,000.

But in 2025, the maximum Social Security benefit at full retirement age is $4,018 per month.

If we assume that in nine years from now, it will be $4,800 a month (which hinges on inflation rising at a target 2% a year between now and then), and we then reduce it by 30% to account for a claim at age 62, it amounts to $3,360.

Multiply that by 12, and you’ve got about $40,000 a year from Social Security. Even with another $24,000 in dividend income, you’re not getting $90,000.

However, $64,000 a year is not a shabby retirement income. In 2023, U.S. consumers spent an average of $77,280, reports the Bureau of Labor Statistics. But it’s common for retirees to spend less than the typical consumer, so $64,000 a year doesn’t read like such a stretch.

On the flipside, though, one of the biggest risks to your retirement income is inflation. In recent years, it’s been fairly rampant.

We don’t know what inflation will look like over the next few decades. But any passive income your portfolio generates could decline in value if living costs rise substantially.

Social Security benefits, thankfully, are eligible for an annual cost-of-living adjustment. You may still need to make changes to your portfolio during retirement to account for a faster pace of inflation should that scenario arise.

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What's the best strategy for growing retirement wealth?

If you're in the process of building a retirement portfolio, it's best to give yourself a much longer investment window than just nine years. But regardless of how far away retirement is, you'll need to ask yourself what strategy you want to employ.

Some investors like to focus on value stocks, which tend to produce higher dividends. However, value stocks tend to see slow, stable growth, as opposed to explosive growth.

Other investors prefer growth stocks, which, as the name implies, focus on rapid growth. Growth stocks tend to pay minimal dividends or none at all. And the reason is that these companies prefer to invest their profits back into their businesses instead of sharing the wealth with stockholders so that their share prices can soar even more.

There's really no right versus wrong strategy. You can grow your portfolio nicely with either value or growth stocks — or both at the same time. But you should know that while growth stocks may be a suitable investment during your wealth-building years, they can also be more volatile than value stocks.

As such, you may want to focus on value stocks during retirement — both for the relative stability as well as the income they tend to produce.

Of course, come retirement, it's also important to hold stable assets like bonds in your portfolio to protect yourself against market volatility. But the nice thing about bonds is that they're also great income-producers.

So if you're focused on passive income, a combination of bonds and value stocks with strong dividends could set you up for a comfortable lifestyle, especially if combined with a fairly generous Social Security paycheck.