As you get closer to retirement, one of the most important financial steps you’ll take is creating a solid income strategy. You want to make sure you have a steady stream of income that covers your needs while also protecting the money you’ve worked so hard to save. That’s where a balanced approach—one that includes both equity income and fixed income—comes into play.
Why Equity Income Should Be Part of Your Plan
Equity income mainly comes from dividend-paying stocks. These are companies that share a portion of their profits with shareholders in the form of dividends. For those of you who are nearing retirement, equity income offers several key benefits:
- Potential for Growth: Unlike fixed income investments, which focus more on stability, equity income provides a chance for growth. Stocks that pay dividends can increase in value over time, helping your portfolio grow even after you retire. This growth can help keep up with inflation, so your money maintains its buying power.
- Steady Income: Many well-established companies have a history of paying reliable dividends. These can be a consistent source of income to supplement other retirement resources, like your IRA or 401(k) withdrawals.
- Tax Advantages: Qualified dividends are often taxed at a lower rate than regular income. This can be a big plus when you’re trying to make the most of your retirement savings.
Don’t Overlook the Importance of Fixed Income
While equity income is important, it’s not the whole picture. Fixed income investments—like bonds or annuities—play a crucial role in providing stability and reducing the ups and downs in your portfolio.
- Protecting Your Principal: As you get closer to retirement, keeping your money safe becomes even more critical. Fixed income investments, especially government and high-quality corporate bonds, tend to carry less risk and can help protect your principal.
- Predictable Payments: One of the biggest benefits of fixed income is the predictable interest payments. This can be really important for covering your everyday expenses, especially if the stock market takes a dip.
- Diversification: Including fixed income in your portfolio helps spread out your risk. A diversified portfolio is better equipped to handle market fluctuations, ensuring you have a reliable income no matter what the market is doing.
Finding the Right Balance
The key to a strong retirement income strategy is finding the right balance between equity income and fixed income. Here’s how you can approach this:
- Know Your Risk Tolerance: First, figure out how much risk you’re comfortable with. If you’re more conservative, you might lean more towards fixed income. But if you’re okay with some ups and downs, a bigger slice of equity income could make sense.
- Look at Your Retirement Accounts: Take a close look at your IRA, 401(k), and other accounts. How are they currently invested? You might need to adjust your portfolio to include a mix of dividend-paying stocks and bonds that fits your risk tolerance and income needs.
- Set Your Income Goals: How much income will you need to cover your retirement expenses? Once you know that, you can allocate your assets to hit that target while still protecting your savings.
- Work with a Financial Advisor: This is where a financial advisor can be really helpful. They can help you craft a personalized strategy that balances equity and fixed income investments to fit your specific needs and goals.
The Perks of a Balanced Approach
By including both equity income and fixed income in your retirement plan, you’re setting yourself up for success. You’ll have the growth potential and tax advantages that come with dividends, along with the stability and predictability of fixed income. This balanced approach can help secure your financial future and give you peace of mind as you enter retirement.
At P.R. Curtman Investments, we understand that every retirement plan is unique. That’s why we work closely with our clients to develop income strategies tailored to their specific goals. Whether you’re managing an IRA, 401(k), or other retirement accounts, we’re here to help you create a strategy that ensures a comfortable and secure retirement.
Ready to start planning your retirement income strategy? Get in touch with us today to set up a consultation and take the first step towards a secure
