Did you know that a majority of working Americans have just one source of stable income? If you are among the majority, you need to find a way to make money when you stop working after retirement.
While that’s a great vision, generating income without working is not as easy as it sounds.
So, how do you get a steady stream of income that won’t run out in your retirement years? In this post, we have gathered seven of the best sources of retirement income that you should consider investing in as soon as now.
1. Income Investing
When doing financial planning for retirement, you should place more focus on growth stocks in your prime earning years. Try to invest more in stocks that are likely to have a steady increase in value over time. Once you near your retirement age, shift that emphasis to income-generating assets instead.
These may include stocks that pay dividends on a regular basis or bonds that pay interests. You can do both if possible. Investing in REITs or real estate investment trust would also be a great idea because you’ll get the return of capital from the income they generate.
If you invest in these assets while still saving, you should reinvest the profits and turbocharge the growth of your retirement nest. Once you retire, the money can be transferred to your bank account.
2. Immediate Annuities
If you have saved a lump sum of money, you can purchase an immediate annuity and turn it into an income-generating stream. The thing that makes this one of the best sources of retirement income is the fact that once you make the purchase, the stream will start immediately. It’ll be predictable, and it won’t be affected by declining interest, and they are immediate retirement funds.
Once you purchase an immediate annuity, though, you must understand that the payment will never increase.
If anything, there is always a chance of a decrease due to inflation. The downside of an annuity is that once you make the purchase, your principal will be locked in, and the insurance company will keep whatever remains upon your death.
3. Social Security
The amount of money you get from social security per month will highly depend on when you start taking your benefits.
When it comes to Social Security Benefits, you may start receiving yours as soon as you’re 62 years old. However, this is not in the full retirement age, and you will get 30 percent less than you would have if you waited till you were 66 or 67.
If you choose to start receiving your benefits after the age of 66, your monthly benefits will grow with as much as 8 percent each year until you turn 70. After that, it’ll level at about 132 percent of the amount you usually get. Now, this does not necessarily mean that you should wait until you’re 70.
Several factors determine this decision, including your health status and your financial situation at that time. The best thing to do here is only taking the benefits when you really need it and not before.
4. Rental Properties
Rental properties are some of the best investments out there, and one of the best sources of retirement income you can possibly have. The role of a landlord may be tricky for some, but rental properties will provide you a stable income in your retirement years.
If you have the capability now, invest in a rental property, or two, and if by chance you choose to relocate, you can rent out your home instead of selling it. You can even downgrade to a smaller house in your retirement years and rent out the bigger house you’re living in, in your prime years.
Real estate can be tricky, though, so if you choose to go that route, ensure you do your due diligence and consider how long you want to manage rental properties after you retire.
If you find tenant management too hard, you can always hire a management company though that will ultimately reduce your income.
5. Home Equity
If you own a home or will have a home by the time you retire, you will have built enough equity that will help you earn income through price appreciation and monthly payments. You might need to sell the house to access the equity, though. Even after retirement, it may still be possible for you to qualify for a second mortgage, or you can just sell your home and downgrade to a smaller and cheaper property.
Alternatively, you may consider a reverse mortgage, though this should be among your last options. These loans can prove to be more problematic than helpful, depending on your living situation at that time.
6. Part-Time Jobs
Post-career work is a thing, and you can work, albeit in the first years of your retirement. A part-time job will be one of your best sources of retirement income, and you’ll still have a sense of purpose and fulfillment, which is a good thing.
Ideally, if you can find something you love to do, like one of your hobbies and turn it into a job, then you’ll be quite fulfilled.
For instance, if you enjoy golf, then find a job at the golf course and spend your days in a happy place for you. If you know how to play an instrument, then become a music teacher and teach kids how to play as well.
7. Laddered Bonds
Generating income in retirement may be easy with laddered bonds. You see, you can achieve a monthly income from bonds if you purchase multiple bonds maturing at staggered intervals. They are low risk, and you’ll be protected from call risk since they can’t be called at the same time.
In general, bonds make interests twice annually, which means having a six-bond portfolio will get you a steady monthly income. The payments are also likely to be predictable and unchanging since the interest rates are locked in upon purchase. Once the bond matures, you’ll just buy another and extend the ladder.
The Best Sources of Retirement Income
Now you’re well informed on how to generate income in retirement.
These are some of the best sources of retirement income you can invest in during your prime years.
Of course, there are other things like pensions if you qualify, retirement accounts such as IRA, certificates of deposits, among others. Having a combination of these strategies will be great at generating income in retirement for you.
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