For most of us, retirement means having the time and wealth to do the tasks that you relish the most. Here is a list of retirement income approaches to generate the cash flow that you will need for days post-retirement.
Build a total return portfolio
One of the best ways to create retirement income is to build a portfolio of stock and bond index funds. This main intention of designing a portfolio is to achieve a decent long-term rate of return, with a recommended set of withdrawal rate rules. There are many distinctions to a total return investment approach such as time breakdown and asset-liability matching, where safe investments are used to meet near-term cash flow needs, and growth-oriented investments are used to fund future cash flow needs. When done precisely, a total return portfolio is one of the best retirement investments you can make. This is one of the most effective ways of retirement income investment.
Usage of retirement income funds
Retirement income funds are a specialized form of mutual fund. The money is automatically allocated across a diversified portfolio of stocks and bonds. These investments are expected to produce future monthly income. Another advantage is that you will be allowed to access your money at any point in time.
Annuities are more of a type of insurance rather than an investment. Annuities produce income that can be used for the post-retirement days. In this case, the insurance company agrees to pay you an income for life in exchange for a reasonably large payment. You will have the liberty to choose the type of plan- fixed immediate annuities or variable immediate annuities and also to select the kind of payout- a 10- years payout, a joint payout or a single life payout.
Buying bonds is a way of lending your money to the government. The borrower settles to pay you interest for a set amount of time. When the bond matures, your principle will be reimbursed to you. The interest income or yield that you would receive from a bond can be a steady source of retirement income. There are bonds based on the time period-short-term, mid-term, and long-term and bonds based on the rate of interest- floating rate bonds, high-yield bonds.
Rental of real estate or owned property
Renting your property will yield a stable source of income but will require maintenance requirements, and incur unexpected expenses. Before rent out your property, you need to calculate all the possible expenses you may experience over the anticipated time frame. Investing in Real Estate is also a better option, but again you will need to consider the unwanted costs that you may encounter.
Dividends and dividend income funds
Instead of purchasing individual stocks that pay dividends, you can select a dividend income fund that will own and manage dividend-paying stocks for you. Dividends provide a steady source of retirement income. With every advantage comes a disadvantage and in this case, there are chances of your dividend payouts reduced or stopped altogether when the company faces risks.
Getting introduced to IRAs
Individual Retirement Account (IRA) is like any ordinary bank account that helps you save. The reason for what makes IRA so reliable is that investing money in it is a simple and an efficient way to plan your income after retirement and it is straightforward to open one. Three major types of IRAs that you can invest in are Traditional IRA, Roth IRA, and Rollover IRA. This is one way to enjoy the tax benefits of your withdrawals post-retirement.
Keep some safe investments
It is essential to keep a portion of your earnings as safe alternatives. The primary goal is to protect what you have. The safe investments do not generate extra revenue. Safe investments come in handy as it is something that you can turn to for unforeseen expenses that may be encountered in your retirement days.
Income generating closed-end funds
The closed end funds are primarily used to generate monthly or quarterly income. This revenue can come from interest, dividends, bonds, stocks or in some cases from a return of principal. Each deposit has a diverse objective; some own shares, others own bonds, some write covered calls to generate income, others use something called a dividend capture strategy. Some closed-end funds use influence; they borrow against the securities in reserve to buy more income-producing securities and pay a higher yield.
Real estate investment trusts
A real estate investment trust is like a mutual fund that possesses real estate. A team of experts performs activities like managing the property, collecting rent, paying for the expenses, etc. The additional income that is earned during these activities will be distributed among the investors. This type of investment is best when it is linked to a tax-deferred retirement account like an IRA.
There are many more options available to you. But it is you who has to learn and do some additional research and choose a retirement income investment. To avail more benefits, you can even mix and match some of the retirement income investment options. Happy investing!