Guaranteed retirement income refers to revenue sources that are certain to be paid out to you in retirement, typically in regular installments.
Having a guaranteed income is important because it helps ensure that you won’t outlive your savings after you leave the workforce. Instead of worrying about whether you can afford your standard of living, you can just enjoy it. To help you achieve that level of security, learn how to guarantee income in retirement with the following five strategies.
Buy Dividend Stocks
Though stock performance can’t be assured, having dividend stocks in established companies comes fairly close to guaranteed income. Like any stock, a dividend stock is a share in a publicly traded company, except that the company regularly pays out portions of its profits to shareholders. The more shares you have, the more dividends you receive. Typically, dividends get distributed quarterly, so you can expect four infusions of cash for every dividend-paying company you invest in.
To pick the safest and most dependable dividend stocks, look for companies that have long histories of increasing their dividend payouts. That not only suggests consistent growth and overall financial health but also may result in higher dividend returns for you in the long run.
Delay Social Security
As the United States Social Security Administration will tell you, you can begin collecting on Social Security as early as age 62, but you may be better off delaying your benefits until age 70.
That’s because an earlier start logically points to a longer benefit period, which results in a reduced monthly payment. On the other hand, your retirement benefits increase by up to 8% with every year you delay your benefits. The yearly increases stop at age 70, at which point you’re eligible to receive your maximum monthly benefit.
All of this matters because by age 70, you should have a clearer idea of how your savings and other income streams will play out in retirement. If you find that you’re on the path to outspending your savings, the maximum monthly Social Security benefit can help you keep pace with your retirement plan. If you’re already doing well, you can enjoy the assurance of having a larger chunk of money added to your account every month.
Look Into a Fixed Annuity
A fixed annuity is an insurance contract that guarantees a specified rate of return on your account. When you purchase a fixed annuity, the insurer determines the fixed interest rate by which your money will grow. You then fund the annuity in either a lump sum or a series of contributions, and the account grows yearly according to the fixed rate for the life of the contract — usually up to 10 years.
At the end of the contract term, you can roll the annuity over into another financial product (including another annuity) or convert it into a steady stream of cash payments. You can elect to receive payments for a specified period in retirement or for the rest of your life, so the income is guaranteed for as long as you want it. It’s for that very reason that fixed annuities seem to be getting more popular among people investing for retirement.
Leverage Whole Life Insurance
Whole life insurance is another type of insurance product that can guarantee income in retirement. It’s a permanent insurance policy, meaning that it’s meant to last until the policyholder passes, at which point their beneficiaries receive a specific amount of money.
However, a whole life insurance policy also builds tax-deferred cash value over its term, which the policyholder can borrow against. Retiree can use the available cash to meet their expenses, whether it’s in case of an emergency or they’re supplementing their other income streams.
This strategy may be particularly helpful to those who no longer need the full death benefit protection that the policy offers.
Monetize Your Hobbies
A surefire way to make money in retirement is to have a semi-retirement, in which you work part-time. To make the work more enjoyable, though, you might want to monetize activities that interest you. If you enjoy woodworking, for example, you can build pieces to sell at the local farmers market or even market yourself online for custom projects. Many people spend their retirements pursuing their hobbies anyway, so why not make some money off of them?
Remember that it’s always a good idea to speak with a financial adviser before making big decisions about your future. They can help you prioritize your current spending and create a retirement plan that minimizes risk and maximizes returns. Ask about the strategies you’ve learned here and whether they may fit well into your plan.