No matter your age or financial goals, you are likely thinking about building wealth now that you will use for your retirement. This type of planning is essential. Even if you have a lucrative portfolio or you have a wide range of assets, you may not be doing everything you can to prepare for what lies ahead. Today, it is not only important to consider how much you have put aside for retirement, but also what types of retirement income you will have during those years.
Isn’t Savings Enough?
Saving for retirement is an important step. However, it is not the only thing you need to do to ensure you have the financial means to live the lifestyle you want during those years. Rather, you need to consider methods to establishing an income during these years. Aside from your retirement plan, what are you doing to create various income streams down the road?
Invest in whole life insurance. One of the steps you can take, that tends to be very valuable, is to invest in a whole life insurance policy. Some policies not only create a death benefit paid to your loved ones or named beneficiaries at your death, but they build value. That value can be tapped into while you are in retirement and create a steady stream of reliable income for you. A nice benefit of this is that it is not impacted by the stock market’s fluctuations and it is non-taxable because it comes from a life insurance policy. Work with your insurance provider to ensure you have this type of policy in place.
Invest in real estate. If you are young enough and well-off enough to do so, consider investing in real estate now. Turn these properties into income earners later. You can be as hands-on or as hands-off as you like. Real estate grows in value. While you may not want to be flipping homes when you are 65, you can appreciate the value of having rental income from tenants coming in while allowing a property management team or someone you know handle the day-to-day management of the property.
Build a strong portfolio. Perhaps the most important step to take is to modify your retirement and investment portfolios. As you get a bit older, your risk tolerance changes. You were once aggressive in your investment decisions and willing to take bigger risks for the potential gains. Now that you are getting older, modify these to ensure that you are reducing the risk of losing your value during retirement. Work closely with your financial advisor to move away from risky stocks and strategies in your late 50’s and early 60’s.
Annuities are another type of investment that will provide you with guaranteed income in your retirement years. There are various types and you should work closely with your financial advisor to get into the most tax-effective strategy based on your age, your investment, and your needs. Annuities seem complicated, but basically you pay into it for a period of time, it grows in value, and they pay you an interest on the investment you made.
What Other Income Sources Are Available to You During Retirement?
A key part of your plan should be to explore all of the opportunities available to you to generate and maintain a steady stream of income through retirement. Some additional options may include:
- Maximizing Social Security investments
- Part time work or consulting
- Tapping into home equity
- Start your own business or hobby-based opportunity
- Take advantage of employer-sponsored pension plans, retirement plans, or other types of offersThese are some opportunities. They will not be appropriate for everyone. However, they can give you some insight into the various sources of income available to you today.
But, How Much Do You Need?
This varies from one individual to the next and depends on everything from your age to the lifestyle you hope to live. What’s important is to create a strategy that addresses every one of your unique needs and concerns. The sooner you do this in life, the less difficult it will be for you. What’s very accurate, though, is that you cannot count on your retirement account (401k or IRA) to be enough of an income during these years. A plan organized to offer multiple streams of income, on the other hand, could be ideal.
Regards,
Ethan Warrick
Editor
Wealth Authority
