Income Strategies For Retirement

Finally, this is the first day in 30 years that you wake up, don’t have to put on that suit, drive to the office or take a meeting. What are you going to do today? The answer is anything you want, provided you have the income to do so. In this article, we will discuss investment options to help you live your life and enjoy financial freedom. While there are many choices and decisions, according to Investopedia “There are a wide variety of income-producing investments that can supplement Social Security and retirement plans while keeping risk in check.”

A predictable financial option for retirees is to buy an immediate fixed annuity from an insurance company. A fixed annuity can offer guaranteed income for a specific amount of time. Investopedia explains, “a fixed annuity is a type of insurance contract that promises to pay the buyer a specific, guaranteed interest rate on their contributions to the account.” Investopedia does warn that there are higher fees associated with fixed annuities than other investment options and those fees and terms can vary from one insurer to the next, so shop around to get the best terms.

Consider account-based investments, they typically have low-interest rates but allow access to your money. There are several types of account-based investments.Consider account-based investments, they typically have low-interest rates but allow access to your money. There are several types of account-based investments. A money market account earns interest without tying up money indefinitely. Chris Muller of DoughRoller explains, “If you are planning short-term and want your money to be as safe as possible, a money market account can provide some level of security. If you can get an APY (Annual Percentage Yield) that stays ahead of inflation, your risks could be almost nil” (doughroller.net).

Another option could be high-yielding savings accounts. Online banks typically have a higher competitive APY because they have less overhead than a traditional free-standing bank. Muller maintains, “if you have zero tolerance for risk and don’t mind glacially slow gains, a high-yield savings account might be best for you. It’s an excellent place to store money for an emergency. Online accounts are easy to manage, and you can transfer funds quickly if needed” (doughroller.net).

Another potentially low-risk also low yielding option is Certificate of Deposit. A CD basically takes your money and loans it to the bank. The interest rate given to the CD is guaranteed and insured. Muller warns, “if you are entirely risk-averse, CDs are a good option—the return is low, but your money is safe. You don’t have to worry about the temptation to access your funds since most CDs have a penalty for early withdrawal.

Although no-penalty CDs are available, the APY on these CDs will typically be even lower” (doughroller.net). Investing in Treasury securities is also a viable option for your money. Again, there is low risk and also a low yield on the investment. Treasury securities ultimately allow you to loan money to the government for a short to the long length of time, during that time interest is being earned. If the security is held until maturity, the full investment is given back to the purchaser. Muller reports, “The U.S. Government backs all Treasury securities. They carry a fixed interest rate, so you have a guaranteed return in regular cash payouts. In volatile markets, many investors feel safer with a fixed interest rate and a
limited investment term” (doughroller.net).

Investing in corporate bonds yields a slightly higher return. Choose corporate bonds wisely, large, profitable companies tend to have lower risks. Muller warns to look for stable, well-known companies that show a long history of dependable return on investment (douhroller.net). Muller asserts, “Bonds are lower-risk than stocks because bondholders get paid first if a company goes bankrupt. Bonds also have a fixed interest rate. If you buy when the rates are high, you maintain your level of return even if rates subsequently fall” (doughroller.net).Life Settlements, Policy Loans and Reverse Mortgages

If you are looking for a higher return, consider investing a portion of your retirement savings in equities or stocks. A popular choice for retirees is stocks of companies that are large, stable, and with a long history of paying dividends. Dividend-paying stocks essentially give you ownership of the company as a shareholder. As an owner, you would receive dividends in the form of cash payments, usually paid on a quarterly basis. Tim Bagany of Investopedia warns, “not all companies pay dividends, though, and dividends can be stopped if a company gets into financial trouble. Also, the retiree must own the stock in order to get paid a dividend and as a result, has market risk. In other words, stock prices sometimes plunge, which could wipe out any of the gains from the dividends” (investopedia.com).

Consider turning one of your properties into an income property, if you own more than the main living home, or perhaps investing into another property as an income property. There are headaches associated with being a landlord and you are still responsible for the maintenance, taxes, and upkeep, but with reliable tenants, it’s a monthly check that could help maintain retirement income. A second income property option would be investing in Real estate investment trusts, which tend to have less headache and footwork associated with being a landlord. Bagany suggests, Real estate investment trust (REIT) shares are purchased directly on securities exchanges or indirectly through mutual funds, which contain a basket of securities. REITs often pay high monthly or quarterly dividends” (investopedia.com). Matt Whittaker of US News adds, “REITs are required to distribute 90% of their taxable income as dividends to their investors, and that yield is usually higher than what you can get from stock dividends” (money.usnews.com).

Matt Whittaker of US News adds, “REITs are required to distribute 90% of their taxable income as dividends to their investors, and that yield is usually higher than what you can get from stock dividendsOne of the often-overlooked sources of value is life insurance policies held by seniors. In retirement, most people realize that the need for insurance no longer exists, but they are so accustomed to paying the premium that they just keep paying it every month, quarter, or year. However, many seniors decide that they no longer need or want the policy and stop paying premiums and let the policy lapse. Others that have some cash value built up in the policy, surrender it back to the life insurance company in exchange for the cash value in the policy. In either case, these seniors may have lost an opportunity to sell their policy to a buyer for a lump sum cash payout through a legal transaction called a life settlement. In many instances, it turns out that their insurance policy could be one of the most valuable assets they own. “Typical life settlement payouts range in the 10% to 30% of the insurance coverage or death benefit.”, according to MRE Finance LLC (mrefinance.com) The cash payout is always higher than the cash surrender value in a policy but less than the death benefit. Payout amounts can vary based on the health of the insured and how much the premiums are. The money received from the policy however can be used however the policy seller wants, including investing it into one of the income-producing options listed above. For more information and to see if your policy qualifies for a life settlement, visit www.mrefinance.comfree-life-settlement-calculator.

The idea is to enjoy your golden years with fewer worries and stress. Retirement is not an end to saving, you do want to ensure the quality of your retirement with a flow of income. Low-risk options have lower returns. If you are investment savvy, gambling with higher risked investments may be more fruitful, try to balance investments for short-term and long-term gain. Allowing your income to be more fluid allows for the freedom to access it.

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