If you're like many of my clients, you may wonder how to build a more resilient retirement plan that isn't overly dependent on Social Security or a pension. You have options.
In this post, I'll discuss various income strategies and show you how to combine them to support a fulfilling retirement.

Why income diversification matters

Relying on a single income source in retirement can be risky. Social Security may only cover a portion of your living expenses, and market volatility can make retirement withdrawals from investment accounts unpredictable.

That’s why diversifying your income streams, just like you would diversify a portfolio, can give you greater flexibility, stability, and peace of mind.

Social Security benefits

Let’s start with the most common income source: Social Security. Timing your benefits strategically can significantly impact your lifetime income.

For example, claiming at age 62 means you’ll receive a reduced benefit, while waiting until full retirement age (66 for those born from 1943 to 1954, gradually increasing to 67 for those born in 1960 or later), or even age 70, can boost your monthly payments significantly.

Delaying isn’t right for everyone, but it’s worth discussing maximizing your benefits based on your health, life expectancy, and other income sources.

You can estimate your benefits using the official calculator available here.

Retirement account withdrawals

Your 401(k), 403(b), and IRA accounts are likely among your most significant retirement assets. Turning those into income requires innovative withdrawal strategies.

Many retirees use structured withdrawal strategies to ensure their savings last throughout retirement. Two popular methods are the 4% rule and dynamic withdrawal models.

This 4% rule recommends retirees withdraw 4% of their initial retirement portfolio each year, adjusting for inflation in subsequent years. The idea is that by withdrawing this percentage, retirees can sustain their savings for at least 30 years without running out of funds. This rule is based on historical market performance and provides a balanced approach between income generation and preserving capital.

Unlike the fixed approach of the 4% rule, dynamic withdrawal models allow retirees to adjust their withdrawals based on current market conditions and portfolio performance. For example, during strong market years, retirees might withdraw more, while in down years, they may reduce their withdrawals to preserve capital. This adaptability can help manage risks and potentially extend the longevity of the retirement portfolio.

Both strategies offer different advantages and can be tailored to meet your financial goals and market circumstances.  

Optimizing your withdrawal sequencing from different accounts (like Roth and traditional IRAs and after-tax accounts) can maximize your income.  Working with a financial advisor can help you navigate these considerations, ensuring you draw from your accounts in a way that aligns with your financial goals and market conditions:

Pension income

If you have a pension, it can be one of the most stable income sources available.

However, even with pensions, you’ll need to choose between lump-sum and annuitized payments.

Some prefer the guaranteed monthly income for life, while others want more control over the funds. I help clients analyze which option best fits their other income sources and lifestyle goals.

Annuities: Guaranteed income with a trade-off

Annuities can be controversial.  For some retirees, they serve a valuable role in creating predictable, guaranteed income.

The key is to avoid complex, high-fee products and focus on simpler, lower-cost immediate or deferred income annuities.

Here’s where annuities might help:

• Filling a fixed income gap
• Covering essential expenses like housing, food, or healthcare
• Reducing longevity risk

Always read the fine print and get a second opinion before committing.

Rental property income

Real estate can be a reliable income generator if you’re comfortable being a landlord or hiring a property manager.

Whether it’s a single-family rental, condo, or vacation property, the right property can provide steady cash flow and potential appreciation.

This income isn’t entirely passive. Vacancies, maintenance costs, and property taxes can eat into your profits.

If you’re not up for the hassle, real estate investment trusts (REITs) may be a simpler, more liquid alternative.

Part-time work or consulting

Retirement doesn’t mean you have to stop working altogether. Many retirees find part-time work or consulting deeply rewarding.

If you’ve built expertise over decades, you might find new opportunities to:

• Teach at a community college
• Consult in your former industry
• Offer freelance services online
• Start a small business based on a passion

A few hours a week could generate meaningful income and provide a sense of purpose.

Turn hobbies into income

Do you love photography, woodworking, writing, or crafting? Your hobbies might be more than just a pastime. They could be small businesses in disguise.

Platforms like Etsy, eBay, and Substack make it easier than ever to monetize your talents. The added income can reduce your withdrawal pressure on investment accounts.

Even if the income is modest, it can enhance your lifestyle or allow for more discretionary spending.

Health savings accounts

If you have a Health Savings Account (HSA) from your working years, it can be used in retirement for tax-free medical expenses. After age 65, you can withdraw funds for non-medical purposes (though those are taxable, like a traditional IRA).

Used strategically, an HSA can reduce pressure on other income sources, especially given how costly healthcare can be in retirement.

Final thoughts

Your retirement should be as dynamic as your working years, filled with options, flexibility, and control over your financial future.

By building multiple income streams, you create a safety net that lets you spend confidently, give purposefully, and live with freedom.

If you're unsure how to begin or want a second opinion on your plan, I’d be happy to help you sort through your options and create a customized income strategy that works for you.

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