Many people approaching retirement have fears about the state of their future finances. In a 2023 survey, the Nationwide Retirement Institute found that 75% of people aged 50 and over are concerned that Social Security benefits will run out at some point in their lives. And even if that doesn't worry you, there's the risk that you may not be generating enough income to live the kind of retirement that you want.

One way to alleviate those concerns is by investing for the long term and preparing for retirement ahead of time. By investing in stocks and relying on income-generating investments during your retirement years, you can be in a much stronger financial position. Below, I'll show you how you can generate $50,000 in annual dividend income by the time you retire.

Use exchange-traded funds to simplify your investing strategy

An ideal way to simplify your investing strategy and to help generate strong returns is to invest in an exchange-traded fund (ETF). By putting money every week or every month into an ETF, you don't have to worry about which stocks are good buys at the moment you decide to invest; you can simply put money into the same diversified ETF to eliminate the guesswork and analysis that can sometimes turn investors off from investing in stocks.

And there are many excellent ETFs to choose from. A popular one is the Invesco QQQ Trust (NASDAQ: QQQ). It holds the top 100 nonfinancial stocks in the Nasdaq, which means you'll have exposure to some of the best growth stocks in the world. Whether you want to invest in Microsoft, Amazon, Nvidia, or even Costco Wholesale, those stocks are all within this fund. And as new growth stocks arise and there are new top names, the ETF will update and reflect the best of the best; there's no need to constantly monitor stocks and valuations.

The Invesco QQQ Trust has made for an exceptional investment over the years. During the past decade, the fund has grown by more than 415%, which averages out to a compounded annual growth rate of 17.8%. That doesn't mean every year you'll achieve that type of return, but with some excellent growth stocks in the fund, you could outperform the S&P 500 index and its long-run yearly average return of 10%.

Investing early and often is the key

Even if you don't have a huge lump sum to invest in stocks today, investing early and often can be the key to generating a large balance. Suppose you could find a way to save $50 per week. Although it's not an easy task amid today's current economic conditions, a possible way could be through the combination of cutting some costs and picking up some extra work. Over the course of a year, an extra $50 per week would mean $2,600 per year in savings, which you could invest in the Invesco QQQ Trust.

Here's how those savings could grow, assuming you averaged a 15% annual return on your investment and invested $50 per week.

Calculations by author.

After 28 years, you could have a balance of well over $1.1 million. Of course, depending on the actual returns, your portfolio balance will undoubtedly vary. Assuming you retire at age 65, that would mean you'd want to start deploying this strategy by age 37. But if you start later in life, you can also make up for that by trying to invest a bit more each week. The conclusion, however, remains the same: Investing as much as you can as often as you can will put you in a better financial position by the time you retire.

When in retirement, it's time to put that money into safer dividend stocks

Growth stocks are good investments when you want to build up your portfolio balance, but because of the risk and volatility that can be involved, they aren't necessarily optimal investments come retirement. When you're in your retirement years and need some more safety, it may be a good time to transition your portfolio into a high-yielding dividend fund.

A good option here is the SPDR Portfolio S&P 500 High Dividend ETF (NYSEMKT: SPYD). It yields around 4.5% and holds a variety of different stocks, including Citigroup, Ford Motor, and Iron Mountain. This broader mix of stocks offers higher payouts and greater diversification than what you'll get with the Invesco QQQ Trust. And if you've got a large portfolio totaling more than $1.1 million, your dividend income could come in around $50,000 per year.

By then, there could be other dividend-focused ETFs to choose from. But with an above-average yield and some great diversification, you can put all the gains you accumulated over the years to work into a dividend-focused ETF to maximize your income during retirement.

ETFs can help you build a diverse and safe investment plan

If you want dividend income or just a place to invest for the long haul, ETFs can help you accomplish your goals while also minimizing your overall risk. And having a go-to ETF to invest in can make your investing strategy much simpler and easier to deploy.

There are many other ETFs you could use for this strategy, but ultimately you can put yourself in the best position by targeting growth-oriented ETFs when you have a lot of investing years left, and putting that money into a dividend-focused ETF once you're in retirement and need more stability. By doing this, you can make your retirement years much more enjoyable as you potentially rake in a lot of money from dividends.

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Citigroup is an advertising partner of The Ascent, a Motley Fool company. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Costco Wholesale, Iron Mountain, Microsoft, and Nvidia. The Motley Fool recommends Nasdaq and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.