Raise your hand if you don’t like the idea of money rolling in as you bask in the glow of retirement. Really, who wouldn’t? But where can you find something like that? It just so happens that the best retirement income streams are exactly that.
The fact is, no matter where or when you are planning on taking your retirement, the one guarantee is that you will still need some income to get you through. The demand never ends. You may have a fair amount of retirement savings. Nevertheless, if you don’t know exactly where your income is coming from and how to maintain accounts to support you into the future, you will eventually find yourself struggling to scrape together enough cash to pay the bills.
For a college student, picking up hustles and extra hours might be okay, but nobody wants to pick up a job on the weekends during their twilight years. With appropriate planning and use of the best retirement income streams, you can set yourself up with regular income vehicles where you won’t have to worry about running out of money in the future.
3 Investments with the Best Retirement Income Streams
When you think about the best retirement income streams, your primary interest will be in dependability. There is no use putting your money into a regular income stream if you don’t know if it will come through for you each month.
The second criteria for a desirable income stream is longevity. If a financial instrument will provide you quality returns for a year or two, it is simply not something to entertain for your retirement years. It won’t even be around that long.
Here is our list of some of the best income sources to take advantage of for your retirement plan.
1. Stocks with a high dividend yield
While finding a place in the stock market that is genuinely considered safe from volatility is rare, there is nothing safer in the world of stocks than a strong company that pays consistently high dividends.
Dividends are paid out by companies as cash and can be immediately accessible to the investor. You will often have the option of automatically reinvesting these dividend payments or taking them as income. In the case of this retirement plan, you would be taking them as your income. It will be important to understand how often each company pays out dividends because it can vary from company to company, although many pay their dividends quarterly. Many investors like to stagger dividend investments using a dividend calendar to replicate the periodic income that a regular paycheck would provide.
Dividend Aristocrats are a good place to begin your search if reliable and growing dividend payments are part of your retirement income strategy.
2. Real Estate (however you like) may offer reliable income
When it comes to safe money, there have been few places as historically safe as real estate. The best thing about investing in real estate is the versatility of investment methods. Both passive and active investing for income are options.
For active investing, you can purchase and hold property to use as a rental space. The downside to this is maintaining the property and dealing with tenants. It’s also important to make sure that you own in a location that will be easy to rent. Purchasing a house in a rural area far away from everything can be a challenge to rent out.
If you have no interest in actively working with the property or tenants, you can also consider the value of Real Estate Investment Trusts (REITs). Shares of REITs can be purchased just like stocks and provide the same dependability of returns. It will be essential to understand what kind of REIT you are investing in to know what sort of real estate your money is going into.
3. Annuities (The right way)
Investors frequently look side-eyed at annuities as a product of advisors and insurance companies hoping to earn large incomes from retiring clients looking for regular payouts. There are certainly some annuities that earn insurance companies more than investors, but that can also come down to a lack of understanding of the vehicle itself.
There are many different kinds of annuities, including variable, fixed, and indexed annuities, and each has its own way of operating. Annuities are an insurance vehicle. Part of what makes them dependable as financial vehicles is their tie to a strong company that knows how to handle money and backs its promises. If you’re new to Annuities, FINRA has compiled a six-part education series that can help you learn the basics before you start investing.
Even with the best retirement income streams, you can hardly ever take a complete set-it-and-forget-it mentality. You at least need to pay attention to the strength of the investment over time (whether that means the desirability of a rental location or the power of a company to pay dividends) and make adjustments as needed.
With any luck, you won’t need to make any adjustments over the life of your investment, but it is always better to stay aware and never have to make a move than to ignore it and miss out on your chance to protect your money.
In your experience, what do you consider to be the best retirement income streams?
*This post has been updated from a version originally published in 2021.