At times, retirement income sources could be really hard to get, especially, if one didn’t plan for it. So are you already planning for your retirement income sources?
We all know that retirement life is a complete ball game compares to when one is energetic, agile, and working.
The fact is that retirement is like a lonely road but if you have a proper plan in place, you don’t have to worry too much.
Retirement income sources
There is good news and bad news when it comes to finding income to fund your retirement. The good news is that you have a lot of options available. Perhaps more options than ever before.
The bad news is that most options come with risks and drawbacks. So are you working towards your retirement plan? Remember, it’s imperative to make sure that you are working towards your pension planning.
If you want to know how other people fund their retirement, below are some of the best sources of income in retirement you should be exploring:
#1]. Pension fund
Pension is still the most common retirement income source. But not that reliable, especially, if your pension is funded by a private company.
Most companies have either failed or cannot afford the financial burden of sustaining retirees. However, pensions for government employees are still common and relatively safe.
But don’t get me wrong, a pension is still a great deal if you can find an employer that offers one. See Life During Retirement: What You Can Do To Boost Your Pension
#2]. Social security fund
In some countries, for every paycheck that you earn, money is taken out for social security. Everyone who pays into the fund for a certain period is entitled to receive monthly benefits starting at retirement.
Your benefits are based on a moving average of the income you earned throughout your tenure. Usually, benefits are increased to match inflation each year. However, this means of retirement income source is not universal.
#3]. Your home is your asset
Another common retirement income source is the equity of your home. Since home values tend to increase over time, you can think of principal payments in your mortgage as forced savings.
If the property value is appreciated, your accumulated principal can be reclaimed as a lump sum if you sell. You can also make a reclaim on fixed monthly payments through a reverse mortgage.
However, claiming that wealth and turning it into income can be tricky when you retire because the housing market is not always stable.
#4]. Financial investment
Numerous financial products such as mutual funds are making it easier than ever to buy stocks and bonds. The best part is that most of these products are diversified and offer good returns over the very long term.
Income is earned from appreciation in stock price and ownership dividends. Over the course of the investment, these returns will pool into a massive nest egg.
At retirement, you begin drawing out those earnings until you expire or run out of money. However, this could also be risky because of the market volatility.
An annuity is a financial product through which you can convert pension savings into a regular income that will last you for the rest of your life.
When you get a quote for an annuity, you’ll be given a rate as a percentage. You’ll need to multiply by your pension savings to calculate how much income you’ll get every year.
However, annuities offer predictability. It does you no good to have a large nest egg if you are waiting for the market to turn before you cash out.
But as complicated as annuities can be, it is still one of the best means of retirement income sources.
#6]. Entrepreneurial ventures
More people in retirement are turning to entrepreneurial ventures as a source of retirement income as a result of non-existent pensions and the dramatic fluctuations in the stock market.
Real estate rental is a common venture for this type of strategy. You can be as involved or absent as you want so long as you don’t mind paying property managers and have enough to buy a property.
In exchange, you can take advantage of property appreciation and rent revenues. Any side business can help you achieve your goals, and thanks to e-commerce it is much easier to find a market.
Other means of retirement income?
There are many options for finding retirement income. The important thing is to identify sources that you believe will meet your goals, and position your finances to take advantage of them. What sources of retirement income are you taking advantage of?