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Most Seniors Will Need Additional Income Streams In Retirement

Most Seniors Will Need Additional Income Streams In Retirement

June 26, 2022

One of the most common concerns expressed by retirees in financial planning sessions is the fear of running out of money in retirement.

As you near the time when you are no longer in the workforce, you might worry about whether your savings will be enough to sustain you once you stop working. The possibility of running out of money is a valid concern, especially for those without multiple income sources outside Social Security to strengthen their portfolios. Moreover, even with adequate planning during the accumulation phase, multiple factors, such as time horizon risk, inflation, and lost opportunity cost, come into play, making the specter of outliving one’s cash even scarier.

Lay a strong foundation first

Living through the current pandemic, it’s probably easy for you to assume that conventional money tactics have become less effective. Uncertainty, volatility, and the natural human aversion to risk cause some people to fear they will last longer than their wealth. If you are within a few years of retirement, I suggest laying a financial cornerstone with “safe money” products before buying alternative assets. Using annuity or life insurance products that give you use, control, and liquidity, as well as potential tax savings, is a starting point for a more peaceful retirement. When you know you have guarantees in place (as is the case with annuities) along with tax advantages and a stream of predictable income, you are then ready to sit down with an advisor and map out your asset allocation strategy.

You will probably need more than one additional stream of income when you retire.

Unless you are one of the lucky few with a pension, inheritance, or another form of income to supplement your Social Security check, you will need to review your portfolio and look for weak spots. Your allocation profile will encompass all sources of guaranteed income, such as pensions, Social Security, and annuities. Next, you will match your portfolio with your projected needs in retirement and determine whether it will generate the needed income. In most cases, additional, perhaps riskier investments will be necessary to make up shortfalls in cash.

Dividend-paying stocks.

If you wanted to generate $65,000 a year in retirement with a realistic 3% yield, your portfolio’s worth would need to be over $2,000,000! Depending on where you are in your financial life and how long you have until retirement, it could still be possible to live entirely off dividends when you retire. A more likely scenario, though, is that you carefully select and purchase quality, dividend-paying stocks to help create additional income.

Most retiree paychecks consist of a combination of both withdrawals of principal and investment income. A well-thought-out dividend strategy can help preserve and grow your principal and make it last longer. It can also generate an increasing income stream, even when market conditions are volatile.

If the idea of owning dividend-paying stocks appeals to you, have your advisor design a stock mix based on the current value of your nest egg, your return objectives, and your risk tolerance. It’s a very attainable goal to build a collection of high-quality dividend stocks with a collective yield of at least 3%.

Cash-flowing properties could help.

Patrick Grimes, CEO of the real estate syndication group, Invest On Main Street, says that passively investing in cash-flowing commercial real estate can be an excellent option for retirees and those about to retire. “With passive investing, you get great returns that often beat anything Wall Street has to offer. Yet, unlike owning and managing rental property, you are not stuck dealing with tedious, unpleasant chores and tenants, “says Grimes.

Grimes says that although commercial real estate does have its shares of ups and downs, investors in apartment buildings have an added benefit. “With rental properties, you have the possibility of receiving money from rents even when the stock market is in a downturn. In addition, when you partner with a trusted real estate deal sponsor and choose your investments carefully, you will add diversity to your portfolio,” he says.


If you are like many people about to retire, you are concerned about running out of money before you die. However, you probably recognize that you will need additional income streams to help you achieve your goals most of the time. Investing in multifamily real estate and purchasing dividend-paying stocks are just two of the many ways you can increase your portfolio’s longevity.