#10C Retirement Income Tools- 10 Things You Need To Know To Plan Your Retirement Income

The word “Income” is usually associated with going to work and getting a paycheck. How do you create income in retirement besides Social Security?  Retirement income tools which are often overlooked including municipal bonds, laddered bonds, and dividend paying stocks. In this blog I will explain how to use these tools to generate retirement income. Although these tools may not be for everyone, if you are nearing retirement or looking for extra income beyond your social security it doesn’t hurt to learn your options.

Municipal Bonds: These are a security issued by or on behalf of a local authority. These bonds are typically a federal exemption on taxes, sometimes state and local as well, depending on where the bond is purchased. The target market for municipal bonds is usually high wage earners/high income tax customers. The main benefit from a municipal bond is the tax savings.

Laddered Bonds: These bonds are a mixture of securities each with staggering maturity dates. The maturity dates are typically short, medium, and long term which creates an effect of having access to money at different periods and having the ability to reinvest. This gives your funds liquidity options. The more liquidity you need the closer together the bond maturities should be. The bonds have lower yields, meaning they are more conservative and you can manage your interest rates. Bond prices react inversely to interest rates. If the investor needs funds before the bonds maturity, the rise in interest rates causes a lower price for the bond on the open market. In this situation its best to wait until maturity or until interest rates decrease which will cause bond rates to increase.

Dividend Paying Stocks: Mature and financially stable companies may pay dividends.  While the stock price steadily increases, investors enjoy periodic dividend payments. Dividends are not guaranteed, they are determined by the board of directors of the corporation. If the market goes down for a few months, or even years, the board can cut the dividend to zero. If that happens, stock value will go down and it will drastically affect your standard of living in retirement. Normally these companies stock prices are less volatile to a downward market.  Dividend paying stocks assist in a steady income flow during retirement.

These are only a few of the options available to develop a retirement income plan. To get more information on these retirement income tools give us a call at 417-882-1800.

Sources:

Bond Ladder https://www.investopedia.com/terms/b/bondladder.asp#ixzz50b9NnHPQ

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