How long will you be retired?  It could be 15 or 20 years, and today we’re talking about 25- or 30-year retirements — maybe even longer.

We hear about people who are living to age 100, and maybe they’ve been retired since they were 65. That’s a very long time to make your money last.

During that time, it is very likely you’ll go through a number of market declines. Think about someone who retired in 2000. They’ve gone through a couple of nasty downturns, haven’t they?

Protection and Diversified Income

They key is to protect your money against downturns and have income not dependent on the market. Nobody would put all their funds in one product. If you have Social Security income, pensions, and income annuities as guaranteed income streams, that’s great. You’re on the right track. But beyond that, there aren’t a lot of guaranteed lifetime income streams, but you can find some that have high probabilities, like dividend stocks.

If you Google “dividend aristocrats” right now, you’re going to get companies that have raised their dividend for the past 25 years, and that’s pretty consistent. Now, if you go through a banking crisis, the banks pull back and drop their dividends to zero. Sears, JCPenney, GE — those are just some examples. So what you want to do is build a diversified dividend portfolio in case one of them (or a whole sector) starts to wobble.

Make no mistake: Dividend stocks are a great way to generate income, even though they aren’t contractually guaranteed. If you buy stocks that have a history of paying and raising their dividends, they’ll also help offset inflation and cost of living over time. 

Do What You Love

Beyond that, what can you do to bring in more income in retirement? Many retirees consider rental income and part-time work as new streams of income. We think that’s going to be more the norm as the generation coming up is used to the gig economy. They’ve found ways to make money in the things they love to do along with their full-time jobs. That mindset of getting a paycheck from a bunch of different places is going to be more common.

I have a client who retired two years ago and then went to work for H&R Block. He does taxes on his own schedule, and it’s made money for him. He told me not only is he making money, but he’s learning how to manage his own taxes along with the new “ins and outs” at the same time. If you can find something you’re good at and you enjoy, go for it, even throughout retirement.

How many income streams do you need in retirement? The answer is as many as possible. The more income streams, the better protection you’ll have in retirement.

*References to “protection” generally refer to the use of insurance and annuity products/services that are market risk averse. Insurance and annuity product guarantees are subject to the claims-paying ability of the insurer.

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