Retirement will look different for every person. How you plan is vital to your success. Whether you use the bucket strategy or just try managing your spending habits, one of the most important tactics is staying ahead of inflation. Don’t let inflation erode your purchasing power. In order to keep that from happening, you may need to enhance your retirement paycheck with other sources of income. That’s the purpose of this fourth income for life strategy—pulling income from your investments.
You likely have some Social Security income coming to you, as well as other sources of monies like cash. However, dividend-paying stocks in a taxable portfolio are an excellent option for supercharging your retirement income. With yields between 0.5% and 4%, these blue-chip stocks can undoubtedly help. The key is to look for companies that show regularly increasing dividends over the long-haul. That will help safeguard your investments from inflation. However, keep in mind that chasing those with the highest yields may not generate enough profit to sustain the returns long-term.
Some people are not a fan of investing in individual stocks. If that is you then perhaps you are better suited to consider mutual funds and exchange-traded funds. By utilizing these types of investment vehicles, you can invest in various companies that pay dividends. That, in turn, helps create more income for life for you to utilize.
Some people are not a fan of investing in individual stocks. It that is you then perhaps you are better suited to consider mutual fund and exchange-traded funds. By utilizing these types of investments vehicle’s, you can invest in various companies that pay dividends. That, in turn, helps create more income for life for you to utilize.
If stocks are not your flavor for investing, bonds could be just what you are looking for. Managing a bond allotment in your portfolio could make a huge difference as well. For conservative investors, 40% or more of their portfolio is typically bonds as they near retirement.
I recommend divvying the bond allotments to where half of them are core bonds or bond index funds consisting of high-quality corporate securities and the United States government. However, one caveat to note, if you are in a 28% or higher tax bracket, then municipal bonds are a better core holding choice for you. In doing so, you won’t owe federal taxes on the income. The rest of your bond allotments can be spread among high-yield bonds, also known as junk bonds, international bonds, floating-rate bonds, strategic bonds, TIPS or preferred stock—these act like bonds and pay out a fixed amount. Another great option is REIT’s or real estate investment trusts. You can also find these wrapped up in ETFs and mutual funds if you don’t want the hassle of dealing with REIT on its own.
Whatever you chose to supplement with, enroll the help your financial planner. They can utilize strategies to keep your taxes under control. The last thing you want to do is give the government more than they are due. If you’re prepping to make strategic moves to guarantee that you have an income for life and you have questions, we’re here to help make your path financially simple.