By the time you reach 72, the IRS expects you to start making withdrawals from your retirement accounts like traditional IRAs and SEP IRAs. If you don’t, you could face up to a whopping 50% tax on the amount you failed to withdraw.
For many seniors, this could be a nasty surprise. But the right income portfolio strategies can make all the difference between stress and financial security in your golden years. Building a strong retirement income is about strategically balancing the need for growth with the security of steady income.
This article will walk you through the steps to boost your retirement income and ensure your future is on solid ground. Read on for the smart asset allocation strategies that can help you prepare for tomorrow, and give you more confidence in what lies ahead.
Diversify Across Asset Classes
When you’re planning for a stable retirement, retirement portfolio diversification is key. You can reduce risk and create a more reliable stream of income over time by splitting your investment portfolio between:
- Stocks
- Bonds
- Real estate
In Ridgeland, Mississippi, many seniors want to keep enjoying the vibrant local lifestyle, whether it’s a day of shopping at Northpark Mall or a visit to the Jackson Zoo. Having a diversified portfolio can provide the financial freedom to continue these activities throughout their retirement.
By spreading your investments across different asset classes, you’re not putting all your eggs in one basket. If one market underperforms, others may still provide a steady income.
For example, while stocks can offer a retirement fund growth strategy, bonds provide stability and predictability. Real estate, whether through investment properties or Real Estate Investment Trusts (REITs), can add a layer of security with steady returns.
By maintaining a balance of growth and security, you can keep your income flowing throughout your retirement.
Prioritize Fixed-Income Investments
Fixed-income investments should be the foundation of your income investment strategies as a retiree. Bonds and annuities provide reliable, predictable payments that can help cover essential living expenses.
It’s particularly important for seniors in communities like SummerHouse Beau Ridge, where maintaining a carefree lifestyle is a priority. Here, independent living residents enjoy the freedom of life without the daily grind of homeownership, and fixed-income investments can support this relaxed lifestyle.
The 4% rule is often recommended for retirees. It’s a guideline that suggests that you withdraw 4% of your retirement portfolio in the first year of retirement and then adjust for inflation in the following years.
The strategy is designed to help your savings last for up to 30 years, which is crucial for ensuring financial security as life expectancy increases. With reliable income from bonds and annuities, seniors can plan their budgets with confidence, knowing they have steady funds to support their needs.
Allocate to Growth Assets Carefully
While fixed-income investments provide stability, it’s equally important to keep a portion of your portfolio in growth-oriented assets, such as stocks. Even during retirement, growth is necessary to help your income keep pace with inflation.
It becomes even more relevant when considering that women, according to the CDC, live nearly six years longer than men on average. For women, slightly more aggressive asset allocation may be necessary to cover those extra years of living expenses.
Growth assets, like dividend-paying stocks, provide the dual benefit of regular income and the potential for capital appreciation. This doesn’t mean putting all your money into the stock market. Instead, it involves carefully balancing the proportion of growth assets in your investment portfolio to ensure you’re not taking on too much risk.
Use Bucket Strategies for Income
The bucket strategy is a simple, effective way to manage your income in retirement. The idea is to divide your retirement savings into three “buckets” for investments:
- Short-term
- Medium-term
- Long-term
The short-term bucket holds cash and other liquid assets that you can draw on immediately for daily expenses. The medium-term bucket, typically consisting of bonds and similar fixed-income securities, can provide income over the next five to 10 years.
The long-term bucket is where you place your growth assets like stocks, which will help you keep pace with inflation and cover expenses far down the line.
The bucket strategy works well for retirees who want to enjoy an active lifestyle. Whether it’s participating in local outings or attending community events, having a bucket strategy allows seniors to confidently manage their finances while still enjoying the things that matter most.
Adjust Asset Allocation Over Time
As you move through different stages of life, your approach to saving and investing for retirement should evolve. Many financial planners suggest saving a portion of your annual income during your working years to prepare for the future.
However, the investment and trading decisions that serve you well in your 30s or 40s might not be suitable as you approach retirement. Younger investors typically have more time to recover from losses, allowing them to take on greater risks.
On the other hand, those nearing retirement may have more income to invest, but they need to prioritize security since they have less time to bounce back from market downturns.
Adjusting your asset allocation over time becomes especially important as you reach major life milestones. Shifting your portfolio to focus on safer, income-generating assets like bonds as you get older can protect your savings.
Having a proactive approach ensures that residents can maintain their financial security and enjoy a worry-free lifestyle.
Strengthen Your Income Portfolio with Smart Strategies
Securing your financial future in retirement starts with smart asset allocation. From diversifying your retirement portfolio to balancing growth with stability, these techniques can help ensure your income portfolio lasts as long as you need it.
At SummerHouse Beau Ridge, we understand that financial security goes hand-in-hand with a worry-free lifestyle. Our independent living and memory care residents enjoy all the benefits of a community designed for comfort and convenience, from our health and fitness center to our scenic walking paths and full-service dining.
Schedule a tour today to learn how we can support your journey to a carefree retirement filled with possibilities.
