Proven Ways to Secure Your Retirement Income

Building a nest egg requires hard work during your earning years. But once you’ve saved enough, you can ideally have a steady, reliable income for your retirement.

The trick is to invest strategically so that your money can work for itself, and you don’t need to rely on selling stocks.

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Understanding every income stream

Your portfolio is likely the driving force behind your retirement strategy. But you may also receive income from other sources, such as Social Security and a pension. Pensions have become less common over the years, but you can start receiving Social Security payments once you turn age 62.

Often the longer you wait to take those payments, the better. Delaying Social Security payments will result in higher payouts when you do start receiving them. While Social Security — and a pension, if you receive one — are good resources, you also want to focus on growing your retirement portfolio via investing.

Creating stability and growth

There are several types of investments that offer steady income. Dividend stocks let investors receive regular payments from companies they’re invested in, in addition to potential earnings from the stock price increasing over time. Dividend income stocks typically have higher yields and lower volatility, while dividend growth stocks are usually known for lower yields, higher dividend growth rates and higher long-term gains.

Dividend income stocks may make more sense for retirees who have less time to recover from the volatility of growth stocks, while dividend growth stocks may be more suitable for young investors with time for their portfolio to recover from market downturns.

Investors can also purchase annuities for consistent annual income. And bonds offer regular income, but they have maturity dates. A popular strategy is to create a bond ladder that spreads maturity dates out. That way, you can access parts of your lump sum over time. Bonds with longer maturities let you lock in a rate for a longer period of time.

Withdrawal strategy and taxes

The 4% withdrawal rule is a popular model for determining how much you should withdraw each year. The idea is that you should comfortably be able to live off 4% of your savings in your first year of retirement, then adjust that amount for inflation during the consecutive years. Keep in mind that the 4% rule is a general guideline, and it’s important to figure out a withdrawal plan that works for your specific financial situation and goals.

And remember that if you have a traditional retirement account, you will have to make required minimum distributions (RMDs) when you turn 73. Withdrawals from traditional retirement accounts are treated as ordinary income for tax purposes.

You can gradually withdraw funds from your traditional retirement accounts to minimize how much you pay in taxes over the long run.

Living confidently, not cautiously

A well-structured plan can help you live more confidently in retirement, knowing that your portfolio is generating enough cash flow to cover your expenses. Dividends, bonds and annuities can supplement your Social Security paychecks and give you more options during your golden years.

A high-yield portfolio also lets you take out less money to fulfill the 4% withdrawal rule. Some investors end up with portfolios that yield above 4% due to compound growth, meaning they don’t have to sell stocks to live their ideal lifestyle.

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