10 Low-Risk Income Streams for a Secure Retirement

When you retire, you’ll need to generate enough income to support your lifestyle without putting your assets at too much risk.

Here are 10 other ways to earn reliable income while keeping risk under control in retirement.

1. Immediate fixed annuities

If you need income with the predictability of Social Security or a pension, you might consider going to insurance company and immediately buy fixed annuity. This is a contract for a guaranteed stream of income for a specified time or for the rest of your life.

As “immediately” suggests, the insurer begins paying you almost immediately, usually a month after purchase and monthly thereafter.

However, annuities are complex. One of the risks of an annuity is that you may not live long enough to collect enough payments to justify the investment. A fixed annuity also puts you at risk inflationespecially if it will be paid over many years.

“The good news for an immediate fixed annuity is that you have a “guaranteed” income/cash flow for life. The bad news is that you don’t know how much this “guaranteed” income will cost,” notes Dan Stewart, CFA®President and Chief Information Officer Revere Asset Management, Inc. in Dallas, Texas.

You can also compare what you can get from immediate variable annuitywhere your payout is partially linked to an index.

2. Systematic withdrawal of funds

If an annuity isn’t right for you, you may want to consider an investment account instead. systematic withdrawal plan. This plan can be set up in both retirement and non-retirement accounts. You tell the investment company how much you should distribute monthly, quarterly, or annually. You retain control of your money, but do not receive the guarantee of an annuity.

“The biggest difference between a systematic withdrawal plan and an annuity is liquidity. Once you pay the premium to the insurance company, you will no longer have access to your capital. By creating a systematic withdrawal plan, you will always have access to capital as long as it lasts,” says Kevin Michels, CFP®financial planner with Medicus Wealth Planning in Draper, Utah.

3. Buy bonds

Bonds represent debt. So if you buy a bond, it means that someone owes you money and is usually paying you interest on it. When assembled correctly diversified portfolio, the safest bonds, such as those issued by the federal government, government agencies and financially sound corporations, can provide a reliable source of retirement income. One smart approach to bond investing is to construct a portfolio of varying maturities using the laddering technique.

4. Dividend shares

Shares represent ownership in a company. As an owner, you can regularly receive dividendsfor example, every quarter. Dividends usually come in the form of cash payments to shareholders. However, not all companies pay dividends, and dividend payments can be stopped if the company experiences financial problems. In addition, the retiree must own shares to receive dividends and, as a result, bears market risk. In other words, stock prices sometimes fall, which can destroy any profit from dividends.

That’s why retirees who buy stocks for income You should probably stick with large, stable companies with a long history of paying dividends.

5. Life insurance

Life insurance isn’t really meant to be an investment, but it can be a welcome supplemental source of income for retirees who find themselves short on funds each month. The safest policy to work with is: whole life or universal life which accumulates monetary value on a schedule. Policyholders can access cash reserves through a loan or actual withdrawal.

The catch: Loans and withdrawals will reduce the cost of the policy. death benefit for the same amount, and if you are unable to repay your loan, heirs will be used to repay the loan.

6. Home equity

You can also click on justice in your home to generate income either by selling a home or by taking out a home equity loan, equity line of credit or reverse mortgage. However, relying too heavily on the value of your home to fund your retirement can be dangerous, as the value of your home can suddenly drop and reduce or destroy your net worth.

As with life insurance, it may be best to view home equity as a backup plan.

7. Income-producing property.

Retired or not, it’s nice to receive that check every month when you rent out your home.

But it’s not much fun if the tenant isn’t paying you. And remember: If you’re a homeowner, you pay property taxes and maintenance costs. One idea for retirees is to consider short-term rentals of their homes through home-sharing platforms such as Airbnb or VRBO.

8. Real estate investment trusts (REITs)

If you like real estate but don’t want to be a landlord, consider investing in REIT shareswho buy, sell and manage residential and commercial properties such as shopping centers and apartment buildings.

REIT shares are purchased directly from securities exchanges or indirectly through mutual fundswhich contain a basket of securities. REITs often pay high monthly or quarterly dividends.

“Real estate has provided investors with the benefits of diversification alongside their global exposure to stocks and bonds. REITs provide investors with access to a diversified portfolio of residential and commercial properties around the world that are highly liquid,” says Mark Hebner, founder and president of Index Fund Advisors in Irvine, California.

9. Savings accounts and CDs

When it comes to earning income, there is nothing safer and more reliable than FDIC insured bank accounts and certificates of deposit (CD). While this strategy won’t generate much return when CDs and savings accounts are paying 2% or even less, it can be an excellent option when interest rates rise to more attractive levels.

10. Part-time

Retirees often want to stay active and involved. Working part-time or short-term gigs if you have the opportunity can be a good way to do this while earning extra income. If you have a hobby or experience that can be sold, there are many ways to earn income on your own terms.

And the only thing that is at risk is your free time.

Bottom line

“Just because you’re retired doesn’t mean you’re not a long-term investor,” says Marguerite M. Cheng, CFP®CEO of Blue Ocean Global Wealth in Gaithersburg, Maryland. “And just because you stopped saving for retirement because you’re retired doesn’t mean you don’t need to save.”

The good thing about these 10 options is that you can mix and match them to suit your income needs and risk tolerance. Getting the right mix can be a little tricky, so don’t hesitate to seek advice from a qualified financial professional.