Future Income Streams During Retirement

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

• 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.

• Different Types of Fixed Annuities

  • 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.

  • 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.

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

• • 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.
    
    • • 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.

     

    • • 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).

     

  • 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 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.

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*Dividends are not guaranteed and are subject to change or elimination.

**Investments in fixed income securities are subject to market, interest rate, credit and other risks. Bond prices fluctuate inversely to changes in interest rates. Therefore, a general rise in interest rates can result in the bond’s price. Credit risk is the risk that an issuer will default on payments of interest and/or principal. This risk is heightened in lower rated bonds. If sold prior to maturity, fixed income securities are subject to market risk. All fixed income investments may be worth less that their original cost upon redemption or maturity.

Income from municipal securities is generally free from federal taxes and state taxes for residents of the issuing state. While the interest income is tax-free, capital gains, if any, will be subject to taxes. Income for some investors may be subject to the federal Alternative Minimum Tax (AMT).

Wells Fargo Advisors Financial Network is not a legal or tax advisor.

Insurance products are offered through nonbank insurance agency affiliates of Wells Fargo & Company and are underwritten by unaffiliated insurance companies.

Guarantees are based on the claims-paying ability of the issuing insurance company. Guarantees apply to minimum income from an annuity; they do not guarantee an investment return or the safety of the underlying funds.

A Guaranteed Minimum Income Benefit (GMIB) feature is an optional rider on a variable annuity that is available for an additional annual charge against the income base. It generally may only be selected at the time of contract purchase and cannot be changed later. It can usually be exercised only after a waiting period. A GMIB feature is not a cash or account value. Please be advised that depending on the performance of the investment option selected, the contract value at the time of annuitization could be such that the investor would incur a higher expense with the GMIB option without receiving any additional benefit.