How do you plan on funding your retirement? A recent article on Yahoo! Finance detailed the 10 biggest sources of retirement income for Americans. From stocks and investments to social security, retired Americans depend on a diversified set of income streams to get them by in their golden years.
Unlike most working Americans who rely on a job as their only source of income, retiree’s use a different approach. Using a set of diversified income streams across several sources reduces the risk of falling victim to a recession, job loss, or outside factors out of your control. While not perfect, the retiree model for diversified income can offer many helpful hints for those of us still in our working years.
Top Sources of Retirement Income
As stated by the article, here are the top 10 sources of income for retired Americans.
- Social Security
- Retirement Accounts
- Pensions
- Savings Accounts & CDs
- Stocks and Mutual Funds
- Home Equity
- Part-Time Work
- Inheritance
- Annuities and Insurance
- Rent and Royalties
Building a Diversified Income Portfolio
There is no magic number as to how many income streams is necessary to reduce any financial risks. The point is that as a person builds a diversified income portfolio, external financial risks begin to decrease. That is not to say that an individual income stream is not subject to a recession or economic downturn. For example, retirees with large retirement accounts saw huge declines in their net worth in the latest recession. However, those who diversified their income portfolio with savings accounts and certificates of deposits were in much better shape.
Professional investment advisers always tell their clients to diversify their assets. This is one of the first lessons people learn when investing their money. There really is no difference between creating a diversified investment portfolio and an income stream portfolio. In today’s volatile job market, it is critical that people build diversified income streams in order to survive.
Planning for Retirement and for Now
An alternative approach that many people are starting to adopt is not only planning for their retirement, but also planning for the now. Instead of devoting all your resources towards funding your retirement, why not build sustainable income streams that can be enjoyed now and in the future?
Creating sustainable, legitimate income streams that can stand the test of time should be a priority for people. Don’t let the next recession, economic downturn, or stock market crash ruin your personal finances. Do yourself a favor and start taking control of your finances for the future and now.
How diversified is your income portfolio?
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- 3 Reasons Why You Should Not Touch Your Retirement Savings
- Are the Rules of Retirement Changing?
- Double Your Retirement Investments
- 9 Reasons Why a Single Income is NOT a Good Idea
- What is Portfolio Income?
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{ 3 comments… read them below or add one }
Hi.. I am from India and have read almost all your post. I love your ideas about passive income generation and start following some of them. Currently I am 23 and recently married. I want to ask you that from which age one should start saving for retirement?
Also.. one more query.
I am able to save 5000 INR every month. I have two options.
(1) Either I pay full 5000 rs to my student loan to complete it soon, rather saving anything.
(2) Or I pay 3000 to my student loan and 2000 to my savings account (but in this case I have to pay my student loan 1 more year)
Which is best option for me, completing student loan first without savings or partially saving + Loan amount?
Please guide me. Thanx in advance.
@Hetal – I believe that you should start building multiple streams of income as soon as possible. As long as it doesn’t consume all of your free time, these simple building blocks will pay off down the road. Instead of thinking you are saving for your retirement, think of it as building sustainable income streams that you can live off of now and in the future.
As far as your student loan, it would depend on the interest you are paying on the loan versus how much you can earn in your savings account. I would assume that your loan has a higher rate? I personally would try and pay off the debt first, but it really depends on your lifestyle.
I know I need to start focusing more on saving for retirement but its hard with the uncertainty of the economy.