Creating Income Out of Your Retirement Savings

Investing during retirement to maximize returns can be a great way to generate a little extra income and make sure there is enough to last in the long term. But it’s important to look at the best investments for retirement, as well as timing your withdrawals to make the most of your money.

Stephanie Faris

Published October 14th, 2021

Table of Contents

Key Takeaways

  • For most people, retirement means relying on a combination of Social Security payments and retirement savings.
  • When strategizing which portion of your savings to use first, it’s important to consider the dividends you can earn by leaving some assets in place longer.
  • As you progress through your retirement years, you’ll need to periodically stop and reassess your strategy, adjusting it to match your current status.

Few things in life are as exciting as that retirement party. After years of working hard, you finally get to sit back and enjoy life. But it can be hard to enjoy your early days of retirement if you’re worried about that paycheck you’re giving up.

Investing during retirement to maximize returns can be a great way to generate a little extra income and make sure there is enough to last in the long term. But it’s important to look at the best investments for retirement, as well as timing your withdrawals to make the most of your money.

Creating Income Out of Your Retirement Savings

As you’re looking at where to put retirement money after retirement, take a little extra time to set things up the right way from the start. If some of your assets can continue to earn dividends, that’s income you’ll be able to rely on well into your golden years. But there are multiple ways you can set things up, so it can be well worth it to look at all the options.

Investing Strategies During Retirement

If you’ve built a retirement investment portfolio and a generous savings, you likely are looking for the best way to take distributions in retirement. There are a couple of recommended approaches to investing after retirement, each with its own benefits.

The Bucket Approach

It would be tough to talk about how to invest for retirement without mentioning the bucket approach, which is a strategy that helps you maximize your assets. With the bucket approach, you use your cash and low-growth savings first, progressing to fixed-income assets like bonds and CDs, and finally using up stocks and other volatile assets.

The Cover-the-Basics Approach

Some feel the cover-the-basics approach is the best investment plan after retirement. With this strategy, you rely on fixed income sources like Social Security, pensions, and immediate annuities and keep the rest of your money in investments. This allows you to keep investing after retirement to maximize your savings.

Mutual Funds for Retirees

Ask an expert, “What is the best investment for retirement?” and chances are, mutual funds will be prominently mentioned. Mutual funds can be a relatively easy place to park your retirement savings that has diversification in one place rather than building a diversified portfolio yourself.

Buy an Annuity

If you’re concerned about a steady income and don’t feel comfortable with risk, investing in equities after 70 might scare you. With an annuity, you give a lump sum of money to an insurance company in exchange for a fixed monthly payment. This can be a great way to create steady, reliable income throughout retirement.

Buying Real Estate or REIT

One suggestion you don’t often see in lists of where should seniors invest their money is real estate. Property can be a very reliable investment. You can buy rental property, land, or even invest in a real estate investment trust (REIT). With a REIT, you buy shares along with other investors and add it to your portfolio, as you would other investments.

The Right Mix Depends On Your Age

When you’re looking at where to invest retirement money and how to generate an income from it, the answer often depends on your age. If you’re early in your retirement journey, it’s important to look at the long-term impact of the dividend-earning investments you have. Later on, you’ll likely switch to an approach that handles your monthly expenses while still leaving enough in your accounts to cover the rest of your retirement.

Final Thoughts

Investing during retirement can be tricky, so a little careful planning can go a long way. You’ll want a combination of low risk-investments that bring both long- and short-term gains. We recommend working with a Certified Financial Planner to put yourself in the best position possible as you enter retirement.

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Stephanie Faris

Stephanie Faris has written about finance for entrepreneurs and marketing firms since 2013. She spent nearly a year as a writer for a credit card processing service and has written about finance for numerous marketing firms and entrepreneurs. Her work has appeared on Money Under 30, The Motley Fool, MoneyGeek, E-commerce Insiders, and GoBankingRates.

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