While many people look forward to reaching their retirement years, sometimes they don’t fully realize that handling their finances during these years can be a delicate balancing act. They probably want enough income to enjoy themselves and relax comfortably and without concern of running out of money. At the same time though, it might be necessary to find the balance between secure spots for their assets and allowing their money to continue producing income or even growing that income.
Guaranteed income for many people might be becoming less and less certain as times change. Many employees used to be able to count upon a good pension in retirement. But as pension plans become fewer and fewer, and many of the remaining pension funds face underfunding and poor returns on investment, what was once assumed as guaranteed income might not be any longer.
And the same goes for Social Security benefits. While benefits might seem certain at the moment, with 2033 currently being earmarked as the year in which (with no changes made to the current system) the Social Security Administration will only be able to pay about 75 percent of estimated benefits, this once guaranteed income stream is apparently on somewhat shaky ground.
Then there are the safe assets. While they might not all be guaranteed income as their attached interest rates could change or they might be affected by inflation or other market factors, all things considered, they are pretty safe in the overall scheme of investment and saving options.
Things like certificates of deposit, savings bonds, an annuity, and cash might be some of the safest as they are typically backed by the financial or governmental institutions that provide them. A home might also be a relatively safe asset over time, but it could be less so in shorter durations when market fluctuations could cut into the overall principal held in a home.
The in-between and risky
There are also the “in-between” assets that are often considered relatively safe over time but that could fluctuate in price or value with more volatility in the shorter term. These more risky investment options might also revolve more around the stock market. From ETFs and bond funds to individual stocks or futures trades, the level of risk associated with these types of investments is often more open to the personal choices and risk tolerance of the investor.
Understanding backup income sources and developing a balanced plan
Many of us have options for backup income sources whether we realize it or not. Even little things like taking advantage of resale options online, through a garage sale, or at brick-and-mortar stores could bring in a little extra cash in a bind. Picking up side jobs or online freelance work could also bring in a bit more income if necessary. While it might not make for much additional income, it could add a few hundred or even a few thousand much needed dollars when money is tight.
Intertwining the various components of the aforementioned income options may help to build a more balanced income in retirement. There will be the money that you know is coming in, the money that is safe and largely to be counted on but that might not be earning you much of a return, and then the riskier assets that may be weighted toward safer or riskier investments depending upon personal preference, income needs, and risk tolerance. Paired with a little extra side income when necessary, these components can create an overall balance of income that provides not only security but peace of mind as well.
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The author is not a licensed financial professional. This article is for informational purposes only and does not constitute advice of any kind. Any action taken by the reader due to the information provided in this article is solely at the reader’s discretion.