The biggest fear for most when they retire is the possibility of not having enough money to live the lifestyle they want. Sure, there’s social security, but that’s really just the baseline of reliable retirement income. To ensure you can live retirement comfortably and do as you wish, you’ll need to establish a diverse portfolio of income streams. This has the potential to give you the most flexibility during retirement.
1.Fixed Retirement Annuities
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What is a Fixed Annuity?
A fixed annuity is an insurance product that pays out income and can be used as part of a retirement strategy. Fixed annuities are a popular choice for investors who want to receive a steady income stream in retirement.
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Different Types of Fixed Annuities
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Deferred Annuities
A deferred annuity has two main phases: the savings phase in which you invest money into the account, and the income phase in which the plan transitions into an annuity and payments are received.
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Immediate Annuities
If you are looking for payments that begin right away and continue for the rest of your life or for a specified period of time, an immediate annuity is your best option.
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2. Dividend Stocks**
- Dividends stocks are simple, generally predictable payments and offer tax advantages. To ensure a safe, steady stream, build a portfolio of stocks with a history of paying and increasing dividends.
3. Municipal Bonds**
- Municipal bonds are debt securities issued by state, county and municipal governments and their various agencies. They allow you to earn tax-free interest They are also exempt from state and local taxes.
4. Self-Fund Your Pension
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- You’re probably not one of the lucky few that still receives a pension. However, that doesn’t mean you can’t technically have one. If you’re a small business owner, you can set up a pension plan (defined benefit) or a cash balance plan for yourself.
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- A defined benefit (DB) fund is a required funding plan, meaning you do not have discretion on making a contribution on a yearly basis. The plan provides a benefit at retirement that is communicated as a specific monthly benefit.
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- A cash balance plan is a DB plan that has the features of both a traditional DB plan and a defined contribution plan with participants seeing a cash account value. This is ideal for professional groups (doctors/lawyers/architects/etc.), very profitable companies with stable cash flow, and employers currently maxing out on defined contribution plans (401k).
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- For those who are not business owners, one can fund a variable annuity with an income benefit rider either within an IRA, a ROTH IRA, or a non-qualified investment account.
- There are fees associated with the variable annuity and additional costs associated with the income benefit rider.
- This can be funded with either an initial lump sum or payments made monthly/yearly.
- You’re probably not one of the lucky few that still receives a pension. However, that doesn’t mean you can’t technically have one. If you’re a small business owner, you can set up a pension plan (defined benefit) or a cash balance plan for yourself.
- You can also fund a Single Premium Immediate Annuity (SPIA).
- An SPIA is paid for with a lump sum. Income can then start as soon as 30 days after making the deposit. With an SPIA, you can receive a lifetime or period-certain benefit.
5. Get a Part-Time Job
- Your golden years don’t have to be spent sitting around doing nothing. Many retirees actually wish to stay active and make some money on the side (without career stress) by working part-time. Try something you’ve always been interested in, have fun, and bring in some extra dollars.
Variable annuities are long-term investments suitable for retirement funding and are subject to market fluctuations and investment risk.