Retirement may be a decade or more away, but are you ready with a reliable source of income? If not, now is the time to prepare. Social security only goes so far, so securing a second income stream can ensure a sense of ease and comfort so that you can enjoy your retirement the right way. According to Senior living.org, you would need 80 percent of what you make now to live in retirement, so if you make $120,000 now, you will need $96,000 to maintain your current lifestyle.
In today’s blog, we will answer your questions about how you can live comfortably during retirement while money continues to generate.
Read about investment strategies for retirement.
Should I Count on Social Security for Retirement?
Even if you’ve done everything right when it comes to saving money for retirement, it may not be enough. With a shaky economic landscape from Covid-19, many retirees are finding it hard to settle down and live out their years comfortably. Increased taxes, inflation, rising healthcare costs, and unpredictable investment returns make for an uncertain future. In addition, 46 percent of retirees have a common fear that social security will either be reduced or eliminated, and 41 percent are concerned they will outlive their savings and investments.
Social Security used to be the primary source of income for retirees, but nowadays, you can’t count on it to get you through your retirement years. There are several factors for this, but primarily because seniors live longer and need more money than what Social Security can offer. Even GenXers, the upcoming retirees, are concerned that Social Security may be depleted before they can cash out. It may be that the fund will be taxed higher or be delayed until aged 70, so if you retire before then, you can’t cash out.
Now, if you own a business or have an inheritance coming, this will help, but even that’s not a guarantee of financial stability in retirement. However, by obtaining other sources of income, you can secure a healthy sum for your later years. Right now is the perfect opportunity to make your money work for you in retirement. If you’re not fortunate enough to have this security, you’re not alone and have come to the right place to discuss strategies that may help to generate income.
What Are the Possible Sources of Income for Retirees?
One of the best sources of income comes from your employer right now, in the form of a 401K plan. This means your employer will usually match a percentage of what you put in, so you can generate additional funds for retirement; however, that alone won’t cut it. You will likely need to combine that with an IRA or other retirement account, so you’re not worrying about the measly monthly Social Security payments from the government.
Back in 2009, when we were coming back from a recession, Some 42 percent of Americans didn’t count on government assistance for when they retired and expected to rely on tax-deferred accounts; this was down from 54 percent the previous year. Moreover, it was at the lowest level since Gallup began questioning workers in 2001.
Now, 65 percent of eligible workers participate in 401K plans, which is excellent; however, it may not be enough to reach that 80 percent discussed above. Nevertheless, this doesn’t mean there aren’t plenty of ways to generate extra income.
What Is a Pension?
In the past, if you stayed at a company for a long time, you would typically receive a pension. This depended on how long you were with the company, your age, and compensation; however, not all employers offer that. Still, this is how it works: an employer would factor in how much you make now and decide that a pension plan would pay out half of that monthly for retirement.
An employer may base this off an average of your pay over the last three years of service and if you retire at age 55 and have been at the company for at least ten years. Now, if you retire at age 65 with 30 years of service, you could receive upwards of 85 percent of your income. This is all incumbent on the US Department of Labor’s specific rules. Keep in mind that most employers offer 40lKs instead of pensions.
Various Investment Plans to Consider
The great thing about investing is that you can start anytime, and if you’re nearing retirement age and discover you haven’t saved enough for retirement, the IRS allows you to play catch-up on your contributions. (in addition to your standard retirement contributions) For example, you can add as low as $1,000 to your IRA or $6,500 to a 401K for however long you need.
Real estate investment trusts or REITs allow you to invest in mortgages or direct equity positions in various property types. Yielding a higher return than that of dividends, REITs require that 90 percent of their taxable income goes to their investors. So when you combine the two, it can make for an excellent source of income.
*Investing in Real Estate Investment Trusts (REITs) involves special risks such as potential illiquidity and may not be suitable for all investors. There is no assurance that the investment objectives of this program will be attained.
Annuities come in different forms and include an investment contract between you and an insurance company that offers a guaranteed return at a stated rate. In addition to fixed annuities, there are:
- Fixed indexed
- Variable
- Immediate
- And deferred annuities
*Annuities are suitable for long-term investing, such as retirement and are not suitable for all investors. Gains from tax-deferred investments are taxable as ordinary income upon withdrawal. Guarantees are based on the claims paying ability of the issuing company. Withdrawals made prior to age 59 1/2 are subject to a 10% IRS penalty tax and surrender charges that may apply. Variable annuities are subject to market risk and may lose value.
Preferred stocks are stocks that have a fixed dividend, and provide different rights to shareholders.
*Preferred stock dividends are paid at the discretion of the issuing company. Preferred stocks are subject to interest rate and credit risk. As interest rates rise. The price of the preferred falls (and vice versa). They may be subject to a call feature with changing interest rates or credit ratings. , a stock-bond hybrid that pays a coupon fairly, more than government bonds, can result in high returns. When a company goes bankrupt, preferred stockholders get first dibs before common stockholders, so if a company stays financially healthy, this could mean big payouts for you.
Consultants are a dime a dozen, but consulting can yield high income if you are or were in a demanding field. Companies will usually contract out a consultant who has been in the business for years and can mentor new graduates or young workers in their field. If you were a professor, lawyer, in IT, etc., you could contribute to the rising generation with your expertise and experience. You can decide how, when, what, where, and the fee for consultations. Not only would you contribute to society, but also your retirement fund.
Is It too Late to Save Up for Retirement?
If you’re well into your 50s and don’t have much retirement saved up, it’s not too late to start saving more or investing for the future. Obtaining a good financial advisor can help explain the options you have and create a plan going forward. Of course, the optimal time to save for retirement is when you’re young and can invest in stocks, CDs, Roth IRA, and the like; however, it’s never too late to save for your golden years.
Now, if retirement is knocking on your door and you fear even what you have saved isn’t enough, you can still generate income.
Let Marvel Wealth Management Be Your Guide
If you’re in a position that includes not having enough money to retire, we invite you to reach out and consult with our experienced financial advisors on our contact us page. We are committed to seeing our clients get the help and resources needed to ensure a comfortable retirement. Let us help you today.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All investing involves risk including loss of principal. No strategy assures success or protects against loss.