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Earning Income from Your Investments: A Guide to Retirement Stability

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One of the biggest questions you may face nearing retirement is how to generate and secure a stable income. This challenge is further highlighted by a study from the National Council of Aging, which found that 80% of households with older adults—or 47 million—are struggling financially today or at risk of falling into economic insecurity as they age. 

Shifting from building wealth to preserving it while generating income requires a thoughtful, strategic approach. It’s about aligning your financial plan with your goals and risk tolerance to help ensure stability in this next chapter of life. In this blog, we’ll dive into effective investment strategies for income generation, key retirement considerations, and how to navigate this pivotal phase of financial planning confidently.

Understanding Income-Generating Investments

Income-generating investments are financial assets designed to help produce regular cash flow, providing the investor with a steady income stream. They are particularly beneficial for retirees, individuals seeking passive income, or anyone looking to supplement their earnings without selling their principal assets. Income-generating investments come in various forms, with distinct features, benefits, and risks.

  1. Dividend-Paying Stocks

Dividend-paying stocks allow investors to earn regular income through a share of a company’s profits, typically distributed quarterly. These payments can serve as a potential income stream for investors looking to supplement other sources of retirement income. However, dividend stocks offer more than just income—they can also help contribute to portfolio growth if the dividends are reinvested, allowing investors to benefit from compounding over time.

It’s important to note not all dividend stocks are created equal. While high-dividend yields can be attractive, they may signal potential risks. Instead of focusing solely on yield, consider companies with a proven track record of stable or growing dividend payouts. These are often well-established firms in sectors like utilities, consumer goods, or healthcare, which tend to perform consistently regardless of economic conditions.

  1. Bonds and Fixed-Income Securities

Bonds and fixed-income securities are investment vehicles where an investor lends money to an entity—typically a government, municipality, or corporation—in exchange for periodic interest payments and the eventual return of the principal at maturity. These investments are a cornerstone of income generation due to their predictability and relative safety, especially when compared to equity investments.

  1. Real Estate Investment Trusts (REITs)

REITs can help provide exposure to real estate without the need for property ownership. One of REITs’ most compelling features is their mandatory taxable income distribution. By law, REITs must distribute at least 90% of their taxable income to shareholders through dividends, which often results in higher yields than traditional stocks. This makes REITs an attractive option for retirees seeking consistent income.

Here’s a look at different types of REITs

  • Equity REITs: Own and manage income-generating properties.
  • Mortgage REITs: Invest in mortgages or mortgage-backed securities, earning income through interest payments.
  • Hybrid REITs: Combine the characteristics of both equity and mortgage REITs.

REITs are a great investment tool. However, like any investment, REITs are not without risks. Market fluctuations, interest rate changes, and property market downturns can impact returns. A fiduciary can help you navigate REITs and alternative investments so they can better fit into your overall financial plan.

4. Certain Annuities

Certain annuities can offer a consistent income stream for life or a specific period. They are particularly appealing to individuals who value predictability, although it’s important to evaluate fees and terms carefully.

  • Fees: Some annuities have high fees, including administrative costs, surrender charges, and commissions.
  • Liquidity: Funds invested in annuities may not be easily accessible without penalties, making them less suitable for emergencies.
  • Complex Terms: Understanding the fine print is essential to help avoid unexpected limitations or costs.

To help maximize the benefits of annuities, it’s essential to evaluate terms carefully and consider how they fit into a broader financial plan. Working with a fiduciary financial advisor can help ensure that you select annuities that align with your retirement goals and financial needs.

Key Considerations for Income Planning in Retirement

  1. Longevity Risk

Longevity is a key consideration in retirement planning, as the risk of outliving your savings is a common concern. Ensuring your income streams last throughout your retirement is essential for financial security. To address this challenge, strategies like structured withdrawal plans or income-generating investments can help provide a reliable foundation and help mitigate the risk of running out of funds.

  1. Inflation Protection

Rising costs can erode your purchasing power over time. Investments like dividend-paying stocks and Treasury Inflation-Protected Securities (TIPS) can help counter inflation.

  1. Tax Efficiency

Taxes can significantly impact your investment income. Strategies like utilizing tax-advantaged accounts or focusing on tax-efficient investments like municipal bonds can help reduce your tax burden.

  1. Market Volatility

Retirees often feel more vulnerable to market downturns, especially when drawing income. Employing a mix of fixed-income securities and growth-oriented assets can help weather potential market volatility.

  1. Diversification

Relying too heavily on one type of investment can expose you to undue risk. Diversification helps spread risk across asset classes and helps balance growth and income generation. For example, a diversified portfolio might include:

  • Dividend-paying stocks for growth and income.
  • Bonds for stability and predictable interest payments.
  • REITs to capture real estate income potential.

Balancing these assets can help mitigate market fluctuations while providing consistent income.

Building a Retirement Income Strategy 

A well-structured income strategy aligns your financial portfolio with your goals, time horizon, and risk tolerance. Here’s how you can approach it.

Step 1: Evaluate Your Expenses

Understanding your expenses is the foundation of any retirement income plan. Begin by categorizing your expenses into two main types:

  • Fixed Expenses: Necessities like housing, utilities, insurance, healthcare, and groceries. These costs are consistent and must be covered by reliable income sources.
  • Discretionary Expenses: These include non-essential but important spending like travel, hobbies, dining out, and gifts. These can fluctuate based on your lifestyle and budget.

Step 2: Estimate Retirement Income Sources

Factor in income from all guaranteed and potential sources available in retirement. Identify the gap between your income needs and guaranteed sources. These might include:

  • Social Security: Calculate your benefits based on your age and work history. Delaying benefits beyond your full retirement age can increase monthly payouts.
  • Pensions: If applicable, confirm your pension payout structure and any survivor benefits.
  • Other Guaranteed Income: Include annuities or income from rental properties.

Once you have tallied these sources, compare them to your budget. This step will help identify any income gaps that need to be addressed through investments or other financial strategies. Understanding the shortfall provides a clear goal for how much supplemental income your portfolio must generate.

Step 3: Create an Income Floor

An income floor is a baseline amount required to cover your essential expenses. To establish this floor, focus on stable income-generating investments such as:

  • Bonds: Invest in high-quality government or corporate bonds with predictable interest payments.
  • Annuities: Consider fixed annuities that provide guaranteed income for a specified period.
  • Certificates of Deposit (CDs): These offer secure, interest-based income for conservative investors.

The goal is to help ensure your basic needs are met regardless of market conditions, providing peace of mind and reducing reliance on higher-risk investments for essential expenses.

Step 4: Incorporate Growth Investments

While income stability is a priority, inflation can erode the purchasing power of your money over time. To counter this, maintain a portion of your portfolio in growth-oriented assets, such as:

  • Equities (Stocks): Invest in dividend-paying or growth stocks to attract capital appreciation.
  • Exchange-traded funds (ETFs) and Mutual Funds: These can provide diversification and exposure to sectors likely to grow with the economy.
  • Real Estate Investment Trusts (REITs): REITs offer growth potential through appreciation and regular dividend income.

Growth investments help your portfolio stay ahead of inflation, helping you maintain your standard of living throughout retirement. Balancing these with income-generating assets is essential to manage risk while achieving long-term growth.

Step 5: Review and Adjust Regularly

Retirement income planning is not static. Your financial needs, market conditions, and the broader economic environment will evolve. Partnering with a fiduciary advisor to regularly review your retirement income plan helps confirm it aligns with your broader financial goals.

How Agemy Financial Strategies Can Help 

With a commitment to trust, transparency, and personalized care, Agemy Financial Strategies is here to help you navigate the complexities of retirement income planning. We help investors navigate the complexities of generating stable income during retirement. Here’s how we can support your journey:

  • Tailored Income Strategies: We develop customized plans based on your unique financial goals and risk tolerance, helping you create a balanced income generation and wealth preservation approach. 
  • Proactive Portfolio Management: We conduct regular portfolio reviews to help optimize your investment performance and adjust strategies based on market trends and changing priorities.
  • Tax-Efficient Planning: Our fiduciaries explore and implement various tax strategies to help optimize your income and minimize tax impact.
  • Risk Management: Your portfolio is continuously assessed and adjusted to align with your comfort level and long-term financial objectives.

Retirement is not the time to set your investments on autopilot. With our award-winning fiduciaries, you’ll have the tools and support to help make informed decisions and secure your financial future.

Final Thoughts

Earning income from investments is a cornerstone of retirement stability. You can enjoy a more financially secure and fulfilling retirement by leveraging diverse income-generating assets, managing risks effectively, and creating a personalized strategy. Agemy Financial Strategies is here to guide you every step of the way.

Contact us today to explore how we can help tailor your retirement plan to your unique financial landscape.

Disclaimer: This content is for educational purposes only and should not be construed as specific investment advice. Please consult the qualified financial professionals at Agemy Financial Strategies before making investment decisions.

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How to Prepare for Retirement in a Volatile Market

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For every investor, the world has become a hard place. But for those reaching retirement, pressure is significantly mounting. Here’s how to cope with a roller-coaster market on the lead up to your golden years. 

When you think of retirement, many Americans imagine a fun and relaxing lifestyle. However, preparing for retirement is no easy task– especially with volatility and rising interest rates. This past year has been especially challenging to plan for retirement. The economy has been turbulent and many are having a hard time keeping up with the cost of living.

It’s estimated that 1.5 million retirees have re-entered the U.S. labor market over the past year due to such factors as more flexible work arrangements, rising costs, and the inability to keep up while on a fixed income (according to an analysis of Labor Department data by Nick Bunker, an economist at Indeed). Additionally, 25% of Americans feel they have to delay their retirement plans because of disrupted savings resulting from increased prices and market instability.

During such an uncertain time many are second guessing their road to retirement. However, a down market should not deter you from reaping the benefits of a fruitful retirement. Here are a few tips to help you prepare for your golden years in a volatile market.

Evaluate Risk Tolerance

When it comes to risk tolerance, having a diversified portfolio will help minimize the impact of risk and total loss in a volatile market. The right mix of investments for you will depend on your unique circumstances, including your age, investment goals, and risk tolerance.

The key is to find the right balance of risk and reward for you.

Investing Without Emotions

It can be hard not to invest with emotions. After all, it’s your hard-earned cash you’re watching rise and fall. Market volatility is a stressful environment for anyone with money in the stock market. Investing with emotions can lead to significant losses.

It can be difficult to impulse buy or sell stocks when the market is experiencing a hiccup. In the end, it’s hard to predict market behavior—so try not to make any risky or permanent decisions regarding your portfolio when it’s likely that current market conditions are temporary. Stick to your investment plan and build on these important building blocks:

  • A retirement date. Figure out how long you’ll have to save.
  • Your major life goals. Plan for small and big events in the future.
  • Your tolerance for risk. Find your comfort zone.

Your plan is like a safety belt when the market starts seesawing. Stay on track by sticking to it during market swings.

Having a Plan in Place

When it comes to planning for retirement, having a long-term plan can help ease stress and keep you on track for the long-run. Market volatility can tempt you to want to ditch your plan, but it’s important to think long-term. If you’re nearing retirement it may be an appropriate time to make some small changes in order to reduce the chances of major risk. Make sure to rebalance your investment plan on a regular basis — quarterly, semiannually or once a year. Why? Because volatile markets can change the proportion of your funds in different asset classes. Therefore, rebalancing resets your portfolio to your desired investment mix.

Note: It’s important not to make any significant changes without consulting your financial advisor. A trusted advisor is crucial to your success when preparing for retirement during a volatile market.

Final Thoughts

Don’t let market volatility derail your retirement savings plan. With the market’s current conditions, it may not be as smooth of sailing as you’d hope for–but market downturns don’t last forever.

The investment professionals at Agemy Financial Strategies can help you make sure your investments and assets are mixed to create a balanced plan for your unique retirement goals. Regardless of a volatile market, we can help strategize asset allocations to help stomach inflation, or revise your current plan to make helpful amendments.

If you’re looking for more ways to prepare for retirement with inflation, connect with the team at Agemy Financial Strategies here to help you get started on your portfolio diversification journey today.

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Volatility Returns to the Stock Market, and May Well Stick Around

September was a rocky month for the stock market and may have offered a stark preview of what the final weeks leading up to the presidential election will be like for Wall Street. Towards the end of the month, both the Dow Jones Industrial Average and the S&P 500 were flirting with correction territory, which officially means a 10% decline from their peak highs.* Meanwhile the Nasdaq was down by more than 10%, as the tech rally that has helped buoy the index and the markets in general throughout the Covid-19 crisis ended. With one of the most contentious elections in American history now just weeks away, and the coronavirus still pummeling parts of the economy, a nervous, mostly down-trending market may very well be the norm right up to November 3rd, and possibly beyond that.

In truth, what we saw in September was typical from a historical perspective. The two months before a presidential election are almost always a volatile period for the markets for two reasons. One is simply uncertainty over the election’s outcome, and that’s obviously a big factor where this race is concerned. Most polls continue to show Joe Biden leading among voters, and Wall Street knows a Biden victory would likely mean a rollback or amendment of the Trump administration’s corporate tax cuts. That, of course,

could further undercut economic growth at a time when it’s already shrunk massively due to the pandemic. On the other hand, there is plenty of debate as to whether a Trump victory would automatically be better for the economy and trigger a new market rally—particularly in light of the pandemic.

The other issue that typically makes big investors nervous just before an election is the legislative inertia that occurs. Politicians are too focused on politics to get anything done, and that’s a major concern this year since the House and Senate have yet to agree upon a follow-up to the Coronavirus Aid, Relief and Economic Security (CARES) Act approved in March.** This is true despite the fact that lawmakers and economists almost universally agree that additional relief measures are needed, especially with all the uncertainty still surrounding the pandemic as we head into fall.

Autumn’s Unknowns

As I’m sure you’re aware, the U.S. surpassed 200,000 deaths linked to Covid-19 in September, the most of any nation in the world.*** Meanwhile, infection rates began spiking again across much of Europe, and in parts of America as schools reopened. Will that trend continue as autumn deepens? It’s possible, and the economic impacts could ramp up again too as outdoor seating options that have allowed many restaurants and other businesses to hang on during the summer months disappear in colder parts of the country. The dining industry has already been hit extremely hard by the pandemic. According to an economic impact analysis by Yelp, over 50% of its restaurants had already closed permanently by early summer, and the number has likely increased since.****

Even if no major resurgence in infections does occur this fall, the economic fallout of the coronavirus crisis seems likely to drag on for other reasons. Those include the psychological impact of the pandemic, and the comfort level most consumers have attained with alternative forms of shopping and recreation. Already, major chains have announced they will not host traditional in-store “Black Friday” sales this year, and for the first time ever, the Macy’s Thanksgiving Day Parade will be an entirely virtual event!

So far, the massive shift to things like e-commerce, videoconferencing, and virtual entertainment has managed to offset the impact of business closures and social distancing rules and helped limit some of the economic damage from Covid-19. However, the longer-term repercussions of this shift have probably yet to be felt as they relate to things like jobs, bottom-line corporate growth, and overall economic stability. Big investors know this, and it’s another reason they’re likely to keep “one finger on the trigger” in the last quarter of the year, ready to pull out if nervousness gives way to fear and triggers another major market downturn.

Uncommon and Unprecedented

While a nervous market in the months before an election is historically common, there also some things about our current situation that make it very uncommon—namely the pandemic and the highly divisive political climate surrounding this election. So far Wall Street has shown amazing resilience in the face of these issues, but that’s due largely to another factor that isn’t merely uncommon but entirely unprecedented. That is the massive amount of artificial stimulus the Federal Reserve has pumped into the economy since the Financial Crisis 10 years ago— which has become even more massive as a result of the pandemic.*****

Will the Fed’s “steroids” continue to pump up Wall Street and stave off another major correction even if coronavirus cases see another major spike this fall? Or even if another relief and stimulus package is not approved? Or even if there is a lengthy legal and congressional battle over the results of the election that prolongs legislative inertia and keeps Washington stuck in the muck like a stalled Jeep?

The bottom line is that these are all important questions to consider as you review your financial strategy this fall. Are you playing smart and sufficient financial defense at this crucial time? Are you well-positioned to take advantage of new opportunities that may emerge one day when the markets and economy are more stable again? Because, rest assured, that day will come!

*Marketwatch.com **“Virus Bill Blocked in Senate as Prospects Dim for New Relief,” AP, Sept. 10, 2020 ***“Unfathomable US Death Toll from Coronavirus Hits 200K,” AP, Sept. 22, 2020 ****“Yelp Finds 53% of Restaurants Have Permanently Closed,” Eater.com, June 26, 2020 *****“Stock Markets Have Now Seen the Peak of Fed Stimulus,” MarketWatch, Sept. 17, 2020

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