How to turn retirement savings into lifetime income
Building a nest egg requires hard work during your earning years. But if you save enough, you can have a solid, reliable retirement income.
It’s a smart investment plan to make your money work for you, and you don’t need to rely on stock trading.
Understanding all income streams
Your portfolio may be the driving force behind your retirement plan. But you can also receive income from other sources, such as social security and pensions. Pensions have become more common over the years, but you can start receiving social security payments at age 62.
Usually the longer you wait to take those payments, the better. Delays in social security payments will result in higher payments when you first receive them. While social security — and a pension, if you get one — are good sources, you also want to focus on growing your retirement portfolio through investing.
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Building Resilience and Growth
There are many types of investments that provide income. Chapter shares allow investors to receive regular payments from the companies they are invested in, in addition to income from stock risk that increases over time. Income stocks generally have high yields and low volatility, while dividend growth stocks are typically known for low yields, high growth rates and high dividends.
Income stocks may make more sense for retirees who have little time to experience the volatility of growth stocks, while growth stocks may be better for healthy young investors.
Investors can also buy fixed annual income funds. And bonds offer regular cash, but they have maturity dates. A popular strategy is to create a bond ladder that spreads the leverage over days. That way, you can tap into parts of your savings over time. Bonds with a long opening allow you to lock in a rate for a longer period of time.
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Tax Withdrawal Strategy
The 4% withdrawal rule is a popular model for determining how much you should withdraw each year. The idea is that you should be able to put away 4% of your savings in your first year of retirement, and then adjust that amount for inflation during subsequent annuities. Remember that the 4% rule is a general guideline, and it’s important to find a withdrawal plan that works for your specific financial situation and goals.
And remember that if you have a traditional retirement account, you’ll have to make minimum distributions (RMDs) when you roll over 73 accounts. Withdrawals from traditional retirement accounts are treated as ordinary income for tax purposes.
You can withdraw cash from your traditional retirement accounts to reduce how much you pay in taxes over time.
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Sitting confidently, not carefully
A structured plan can help you live more confidently with confidence, knowing that your portfolio is generating enough cash flow to cover your expenses. Deductions, obligations and policies can supplement your social security paychecks and give you more options in your prime.
A portfolio that burns more and allows you to withdraw less money to achieve the 4% withdrawal rule. Some investors end up with portfolios that yield above 4% because of compound growth, meaning they don’t have to sell stocks to live their best lives.
