According to the Social Security Administration, at least half of the elderly population in the United States relies on social security as their primary source of income. In other words, more than 50% of retired people in the country either did not take advantage of a retirement plan or did not have access to one, meaning they may not have significant income streams in their retirement. Whether you’re nearing retirement or starting your career, the financial planning experts at Merit Financial Advisors recommend making retirement arrangements sooner than later to guarantee steady income streams once you retire. As a retirement plan company based in the Southeast with an expertise in wealth management, the team of advisors at Merit can help you explore a wide range of options for securing your retirement fund and leveraging your savings, allowing you to live the life you want to live after transitioning out of the workforce.
One of the biggest mistakes people make when making retirement decisions is failing to diversify their income streams. Rather than relying simply on social security payments or a savings account, developing a portfolio with a wide range of income generators will increase the amount of money received later in life and provide you with an overall higher degree of financial security. A retirement plan company assists young professionals and soon-to-be retirees alike in this planning process by offering options—from annuities to retirement income, closed-end, and dividend funds—ultimately allowing you to customize your portfolio according to your individual preferences.
5 Top Investments for Retirement Plans to Provide Steady Income
1. Annuities: Immediate, Fixed, Fixed-Indexed and Variable
A series of payments disbursed at regular intervals, annuities provide retirees with guaranteed income for either a fixed period of time or a lifetime, depending on the retirement plan.
An immediate annuity allows you to receive income as soon as you’d like, for lifetime or a fixed term, such as ten-years. Since opting for immediate annuities could include forfeiting the ability to further access the underlying asset, caution should be exercised when deciding to initiate immediate annuity payments.
Fixed, Fixed-Indexed and Variable annuities, on the other hand, offer retirees with the option of funneling your money into underlying investment options . By paying an additional fee, you can purchase a rider, which insures future income withdrawal amounts, ultimately providing you with the unique ability to build wealth based on market fluctuations.
2. Funds: Retirement Income, Closed-End & Dividend
Common types of retirement funds include retirement income, closed-end and dividend.
Retirement income funds, a kind of mutual fund, invest your savings into a portfolio of bonds and stocks, allowing you to reap the benefits of keeping a portfolio without having to play an active role in making investment decisions. Your money is available for withdrawal whenever you need it.
Closed-end funds require some investment knowledge and expertise, which can be provided by a reliable retirement plan company. In a nutshell, closed-end funds use strategies like covered calls and dividend captures to overlay bonds and stocks. Dividends, interests, premiums, and other securities create income over time.
Dividend income funds pay dividends from underlying stocks in a diverse portfolio, usually from qualifying companies on the market. In order to determine if you should consider a dividend income fund, it’s recommended to speak with your retirement plan company, as there are risks involved.
4. Total Return Portfolio
Generating income in capital gains, dividends, and interests from a diverse portfolio of mutual funds and exchange-traded funds, a total return portfolio provides retirees with an opportunity to build wealth over time. Since there is no fixed interest rate nor a strict set of withdrawal rules, a total return portfolio has the potential to fluctuate greatly from year to year, but in the long run, it targets the total average return, instead of a fixed amount. This means that a total return portfolio is sensitive to short-term market fluctuations, but is designed to pay off in the long run.
Bonds are loans given to companies, municipalities or governments that mature over time, providing the lender the opportunity for steady, reliable interest payments. By building a bond ladder—or, purchasing bonds with a variety of maturity dates, allowing you to cash them in at staggered intervals—you can add to your steady flow of income during retirement. Even though they can have lower returns than other investments, they are a potentially lower-risk tactic to employ when planning for your retirement fund.
Schedule a Consultation with a Retirement Plan Company Today
Learn more about earning a steady income during retirement by contacting the financial planning experts at Merit Financial Advisors now. Our financial planning advisors have worked with clients over the years to prepare them for the transition from wealth accumulation to slow decumulation, making sure they have the amount of money desired to live out their retirement exactly as they’ve always imagined. In a short period of time, we can assist you in determining exactly which investments are right for you and your family in the long run.