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Why Diversifying Your Income is Critical in Retirement!


Here are some recent headlines from The Wall Street Journal, MarketWatch and Investment News that should get your attention …

  • “Medicare trust fund will be exhausted in 2026.”
  • “Social Security to Tap into Trust Fund for the First Time in 36 Years.” 
  • “Stock Market Returns Over the Next Decade Will be Well Below Historical Norms.”
  • And “The Pension Hole for U.S. Cities and States is the Size of Germany’s Economy.”

Social security, Medicare, pensions, and stock market returns are all critical components of your retirement. But their financial stability is now in question. If you’re counting on any of these things to help support you, you have good reason to be concerned.

In a best-case scenario, this could have a serious impact on your lifestyle in retirement. In a worst-case scenario, it could force you back to work.

This underscores one very critical thing. You can’t rely on just one source of income in retirement. You must have a diversified number of income sources.

We will be covering why diversifying your income sources in retirement could help you avoid a financial disaster, as well as how to navigate the critical challenges ahead with Medicare and social security, your options to generate income today – no matter what’s happens next on Wall Street, and more.

Successful retirements are not built on assets, or the amount of money you’ve saved, they’re built on your ability to generate income in retirement. Stock markets go up and down, but your income is the backbone of your retirement game plan. You need a plan to make your money break a sweat.

Generating income is tougher today than ever before. Traditional “go-to” options for generating income are dead. Pensions are all but history. Although interest rates are on the rise, they are still historically low, meaning rates on CD’s and savings accounts are a joke. $500,000 in a one-year CD today will only fetch roughly $700 a month. And that’s before taxes! And it doesn’t look like these rates are going to significantly change anytime soon. Bond yields aren’t any better, and people still fear investing in a stock market that remains at near highs. Historically speaking, we are well overdue for a bear market.

According to a recent Kiplinger – From 1926-2017, bull markets lasted on average nine years. If that is the case, this bull market should be ending right about now, as it just turned 9 on March 9, 2018. Also, the typical bear market lasts 1.4 years, with an average cumulative loss of 41%. This mean trouble is on the horizon (just look at the recent volatility).

Show me someone who lives in constant fear of running out of money, and I’ll show you someone who doesn’t have a plan to generate income. It’s that simple. However, you can’t just have an income plan, you need a diversified income plan. It’s risky to rely on one source of income in retirement. The following are some potential sources of income, but this is where you should use your expertise to go over these topics in detail.

  • Dividend stocks – Most mature companies pay a recurring dividend to shareholders. In most cases, these dividends are paid quarterly to shareholders who owned the stock on the date of record. Typical yields for most dividend focused ETFs are 2-3%.
  • Investment grade corporate bond fund – has bond holdings from highly-rated companies in a proportion that is meant to mimic the indices they track.
  • Municipal bonds – debt obligations issued by states or other municipalities to fund projects. Some, but not all municipal bonds are exempt from federal tax for all investors and exempt from state tax if the investor lives in the state of the municipality issuing the bond.
  • REIT – Real estate investment trusts own a portfolio of real estate, the purchase of which is financed by debt and the issuance of securities to investors. A REIT can be public or private and open-end or closed-end.
  • Reverse mortgages – the bank pays you, you keep your home, and it remains part of your estate. Essentially, you are putting your home equity to work for you.
  • Commercial/residential/multi-unit real estate – Buying a rental property is a rather straightforward proposition, especially if you know the local market well that you’re investing in.
  • Annuities – insurance products that pay out over your lifetime, no matter how long you live. And these products have come a long way over the last few decades.

However, the specific strategies that will be used for you will be totally different than anyone else, because even a minor difference in your age, assets, risk tolerance, or life expectancy could trigger a major shift in strategy.

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