No. of Recommendations: 10
Retirement means completely different things to different people. For some it can mean being less active in business, for others it means being more active, for some it means reducing income, for others it means increasing income, and so on. It depends on such a multitude of factors that one must firstly keen an open mind about what Retirement Investing actually means.
With that said, there are a number of strategies that retired investors rather typically use to generate income in retirement. Some of these strategies include:
(1) High return compounding: For the high flyers, if you managed to compound your capital prior to retirement sufficiently strongly, such that your required income is less than 3% of your capital at retirement, then you can continue to concentrate on compounding at a highest average rate (such as holding an equal weighted index fund) - and treating this capital as your 'engine'. You can then be cautious with your income (not wanting to 'eat into your engine') whilst remaining aggressive with the capital compounding for the higher long-term CAGR. The theory here is that you don't know how long you may live, and might not be just thinking about yourself but what your capital can be used for, for the world more broadly. This approach is Shrewdish, but often available only to long-time business owners or others who could 'escape the system'. to really compound capital at a high rate earlier on.
(2) Returning to Earth, there is also dividend investing: Dividend investing involves buying stocks or mutual funds that pay dividends, which can provide a regular stream of income. Dividend-paying stocks can also help protect against inflation.
(3) Next we have bond laddering: Bond laddering involves investing in a variety of bonds with different maturities, creating a stream of income as the bonds mature. This strategy can provide a stable source of income while also allowing for some flexibility in reinvesting the proceeds from maturing bonds.
(4) Don't forget asset allocation: Asset allocation involves dividing your investments among different asset classes, such as stocks, bonds, and cash. This can help reduce risk and provide a more stable stream of income.
(5) And what of annuities? An annuity is a financial product that provides a guaranteed stream of income for a specified period of time. There are several types of annuities available, including fixed annuities, which provide a fixed payment, and variable annuities, which allow for investment in a variety of assets.
(6) Reverse mortgages have become popular, especially with the finance industry's love and obsession with debt - debt is largely how the finance industry thrives, so the following concept will be promoted to you. A reverse mortgage is a loan that allows homeowners to borrow against the equity in their homes. This can be a useful option for retired homeowners who need additional income but do not want to sell their homes.
(7) Part-time work: Many retirees choose to continue working part-time in retirement to supplement their income. This can provide a sense of purpose and social engagement, as well as additional income.
You can also combine these strategies Shrewdishly to different extents to ensure that you have a very reliable ongoing income.
- Manlobbi
