Chances are, when your grandparents stopped working, they had two things that provided retirement income: Social Security and pensions. But over the last several decades, companies have moved away from pensions in favor of 401(k) plans as Social Security no longer provides enough income to provide the quality of life that most retirees seek. Those pensions that generations of workers relied on to provide steady income, became investment funds that eventually had to be withdrawn and managed.

Once you enter your retirement years, you shouldn’t think of your retirement savings as a lump sum. Diversification becomes important to grow and provide sources of income as you age. This means you should avoid drawing all of your income from a single source by funding your retirement using multiple streams. But how? Here are some examples of income diversification:

Dividend stocks and exchange-traded funds: While these are not risk-free streams (which is often desirable in retirement), they often provide predictable payments and offer some tax advantages. Investing in the right stocks and doing some research can give you an opportunity to get returns on a portion of your income. Exchange traded funds, in particular focus on stocks that are considered high quality and offer greater yields. Qualified dividends are taxed at lower rates than ordinary income and for some tax brackets, these dividends are not taxed.

Municipal Bonds: These are debt securities issued by counties, cities, or states to fund projects and operations. They give purchasers payments at a fixed rate of interest at regular intervals. When the bond matures, the purchase amount is fully paid back. One of the benefits of these bonds is that proceeds are exempt from federal and state taxes. While they are not free from risk, investors usually buy multiple bonds at staggered maturation dates to provide stable income.

Certificates of Deposit: These are essentially savings accounts that require you to leave the money untouched for a specific time. The rate of return varies by the length of the term,

but carry low risk. You’ll receive interest payments for the length of the deposit with the entire deposit being repaid when the certificate matures. CDs with longer terms generally pay higher interest rates. As with municipal bonds, purchasing multiple CDs with staggered terms can be useful in providing steady income.

A retirement career: More and more retirees are changing the definition of retired. Many times, they are choosing to work a few hours each week at a low-stress job doing something they love. Having a retirement career with little commitment can keep seniors active and healthy in addition to providing an extra source of income. While this isn’t for every retired person, a lot of people enjoy having a job with a change of pace.

Annuities: As we have covered in other blogs, these are products sold by insurance companies that guarantee regular payments to investors. Annuities protect your retirement income while providing a steady stream of income. There are a variety of annuity products to choose from and some of them even include inflation adjustments. There are good products and bad products, so it’s important to choose one that clearly outlines any fees and details and meets your needs.

There are many advantages to choosing annuities, but we must stress positioning them in the context of broader retirement income planning. Having a qualified retirement income advisor to help navigate the complexities can put you at a significant advantage. Blue Waters Financial Group specializes in asset protection with a focus on distribution and income. We help clients develop a custom financial strategy that removes the fear of running out of money in retirement.

Let’s discuss your financial future and the possible role of annuities and insurance products in your financial strategy. To schedule your no-obligation meeting, just click on our contact page or call us today at 704-790-2583 (BLUE).