Hello, and welcome to How to Retire on Time, a show that answers your questions about all things retirement, including income, taxes, Social Security, health care, and more. This show is an extension of the book, How to Retire on Time, which you can grab today on Amazon or by going to www.how to retire on time.com. My name is Mike Decker. I'm the author of the book, How to Retire on Time, but I'm also a licensed financial advisor, insurance agent, and tax professional, Which means when it comes to financial topics, we can pretty much discuss whatever is on your mind. Now that said, please remember this is just a show.

Everything you hear should be considered informational as in not financial advice. If you want personalized financial advice, then request your wealth analysis from my team by going to www.yourwealthanalysis.com. With me in the studio today is my esteemed colleague, mister David Fransen. David, thank you for being here today.

Hello. Thank you.

This is gonna be a fun show. And now just for the newcomers, David will be reading your questions, the questions you have submitted, and I'll do my best to answer them. You can send your questions in now or anytime during the week by either texting them in to 913-363-1234. That's 913-363-1234 or email them to hey mike at how to retire on time.com. Let's begin.

Hey, Mike. I'm trying to figure out how to generate income in retirement, but everyone I talk to who says they specialize in income planning sells annuities. What other ways are there to plan income in retirement?

Yeah. This is a a a very common situation. So you've got different factions within the financial services space. So you've got the securities side of the business, you've got the insurance side of the business, and then you have your CPAs who are kind of caught up in the middle of this income strategy fight. The reality is, and this is just my opinion, there are around 10 ways you could generate income, but there's so much money to be made in selling annuities that it almost suffocates the ad time and the explanations.

And the big reason for that is when you sell an annuity, the insurance agent and this is just how it is. I I this isn't meant to be derogatory, but an insurance agent will get 5 to 7% upfront commission if they choose the upfront commission model. Most seem to do that. And then once they sell the annuity, there's really not much to do until then you turn on the income stream. So it's like 2 meetings and you get nice commission.

So they have, and this is just based on my observation, a little bit more potential in marketing funds, a little more potential in just getting their message out there. So here's just a few things to consider, and then I wanna go through and answer this question and kind of talk about 10 different ways you can generate income, so you can not just think outside the box, but understand how to blend strategies. You know, we we talk about diversify your assets. Well, why wouldn't you diversify your income strategies too? Yeah.

That makes sense to me. Yeah. Me too. Before we start, it's important to understand there's no such thing as a perfect investment product or strategy. It doesn't exist.

Nothing does everything well. Some strategies are gonna require risk in one way. Other strategies are going to require risk in another way. You can't eliminate all risks in retirement. That's just not possible.

Anyone that would say so, I believe, is either unconsciously incompetent, as understand that they don't know certain risks that are out there. I I do think most people in the financial services space are genuinely trying to help you. I just I I believe there's good intentions. But if the professional has a lack of experience or a lack of knowledge, then there's a problem. So all that said, let's talk about 10 different ways that you can generate income in retirement.

Let me go through them as a list right now, and then I'll talk a little bit about each of them, one at a time. So you you do have the encore career, which is basically what I define as you've left a job that you hate, and you're working part time or full time at a job that you would do just, you know, if if it were free, you do the job. You just love this kind of work. It gives you purpose. It gets you up in the morning.

That's a way to generate some income, whether it's all that you need or not. It's it's a it's a hobby that also generates income. I call it the encore career. You've got social security, if you qualify. Most people in America seem to be able to qualify for that.

Even spouses that never worked a day in their life, if they're married, to someone that does qualify, there's the spousal benefit. There's also some benefits there that you can you can work into your plan. Pensions, if they're applicable, and I wanna highlight this too. Pensions are a great lifetime income from the a company. They are taxes income, and there's a conflict of interest for any financial professional, in my opinion, that does a pension versus lump sum analysis, because the advisors only gonna get paid if you take the lump sum analysis.

So be careful in that conversation. You've got the annuity, which we talked about, which offers guaranteed income for life. Doesn't mean it's guaranteed comfortable income for life, and we'll talk more about that in just a moment. It just means income for life at whatever is predetermined. You've got the 4% rule.

The 4% rule is based on the idea that you can put your assets and stocks and bond funds and all mutual funds, ETFs, focus on growth, and if your stocks or equities average, let's say, 8% year over year and bonds average or bond funds average around 4% year over year, just historically speaking, you should be able to draw 4% from your portfolio and not dip into your principal. You're living off of kind of the growth. I see. There's some problems with that, but that's the theory behind it is a growth focused portfolio, and you take income from the profits. You've got a dividend portfolio, so you could buy what what are called blue chip stocks or other dividend focused stocks.

There are mutual funds, like the aristocrats, for example, that it blends a bunch of stocks together to generate dividends or income that way. Bonds are often used municipal bonds for a more tax efficient income stream. You can go into other things like REITs, and that's kind of more of a limited partnership income category, but the that's another one you could do is partnerships income, like real estate investment trust and so on. You could have rental real estate itself. So whether it's a residential property or a commercial property, you can generate income through your real estate.

If you get tired of your real estate, you can, 1031 exchange it into a Delaware statutory trust, which would then allow you to maintain your cash flow while you're also able to appreciate the value of of that asset. And then, you've got option trading, which okay. If you're if you're not trading options, just ignore this one. If you are trading options, I would just double check that you know what you're doing. It is much more risky than people realize.

I've had too many people tell me to my face that they knew what they were doing, and then either weeks or years later, they just lost a significant portion of their assets because they didn't understand how to correctly hedge against risk. If you're not doing it, don't. If you wanna learn how to do it, do it through a simulation. Make it a game, but don't risk your retirement on something that you don't have sufficient experience in. And then the last one, we we talk about the reservoir income strategy, which really suggests that you can blend your income strategies however you want, but we believe that you should have a reservoir or a group of assets that are principal protected and have growth focus or a growth potential with them So that when hard times come, whether your accounts go down, whether your dividends are paused for a moment, whatever happens, that you can take income from a principal guaranteed source and help you get through those hard times.

So those are the 10 strategies. We could talk probably for a couple of hours on these. In fact, I'm actually redoing our course, your retirement income simplified, and going very deep into every one of these strategies so you could understand the benefits and the detriments that are available. But, I mean, David, that's not a normal thing to go down a list of all these different strategies. No.

Right? You don't really hear that often.

Right.

It's not, hey, Grow your assets and take the income that you need, which is a very ambiguous, winging it strategy. It's okay to not lock up your assets into a lifetime income stream that may not keep up with inflation, that may not support lifestyle adjustments in the future, that may hurt with your tax planning. Because if taxes go up and your income is pretax, then your income goes down when taxes go up. That's a problem. Mhmm.

But, yeah, there are 10 ways you can generate income. Let me go through them one more time really quick. You can continue working, but in a fun job. You got Social Security, which can help supplement part of your income. You've got your pension, if you have a pension.

You've got the annuity income, which you could do. I don't want to say that the tool is bad. I believe the tool is often misused or overused.

Okay. Good distinction.

If you want, let's say, 20,000 plus your Social Security cover, your baseline, I get that. I don't believe it would be financially in your best interest. It's more of living within your emotional limits. It will help you sleep better at night because insurance products really are transferring a risk to an insurance company. It's not to get rich.

Insurance products are not investments. You got the 4% rule, joined around 4% from your portfolio, from the growth. You've got your dividend portfolio. You've got your real estate, if you already have real estate. You've got option trades, if you're already doing it.

But again, that's just it's really risky. Please understand the risks that you're taking. You got partnership income. So you're you're investing 2 shares of a company, whether it's a real estate investment trust, private partnership, or whatever the opportunity could be that generates income from a passive standpoint. And then you've got this reservoir concept, which we talk about extensively in our book, how to retire on time, that allows you to get through turbulent times.

I think it would be ignorant to say that you can't be fired from a job, that social security can't have economic issues, that pensions can't go bankrupt because they can.

Mhmm.

That an annuity can't offer you everything. That that it's not subject to, inflationary risk, that the market can't crash, and that that would never hurt your ability to maintain your retirement, that dividends can't dry up, 600 prominent companies during the pandemic cut their dividend. What were the people all in on dividend income supposed to do? Real estate real estate investments can't dry up. There can't maybe maybe you would never have a problem with tenants.

You would never have a problem with someone destroying your house. You would never have a problem with maybe just the repairs piled up and you didn't wanna pay for it. Options. It could never go wrong. All these ideas, that a partnership can't go belly up.

All these ideas that you can't experience risk, that you can't experience a hardship. Every plan, every strategy has risks. And it's understanding those risks, how to blend the different strategies together, and then what we believe is having the reservoir to bridge the gap or to sustain yourself during those difficult times so that you can let the strategy or let the investments recover without accentuating losses. I I don't know any other way to put it. And there are other very unique strategies that could also be in there, but those are the main ten.

And if this is new to you, by the way, the idea that you could diversify income strategies, that someone would be so neutral about, hey, here's what's available. Here are the benefits, detriments, and then work with you based on your lifestyle and legacy goals. If this is a kind of a new thing to you, then chances are you've worked with a salesperson and maybe not a consultant person. We're indifferent on what you decide to do. It just has to make sense.

Everyone has to be able to articulate the why with eyes wide open of the risks that are associated with the strategy. If you wanna have a more comprehensive conversation about this, then here's what you can do. You can text income to 913-363-1234 right now. That's income, keyword income, to 913-363-1234, or go to www.retirementincome.report. Here's what's gonna happen.

You're gonna be able to fill out some basic information and then schedule a 30 minute call with me. In that 30 minute call, I'm gonna learn more about your lifestyle and legacy goals and what you've got to work with, where things kind of currently are, just setting a baseline. Then we'll schedule a 60 minute call where I can show you different versions of the plan. I can show you different versions of what your retirement could look like, really just to open your eyes and show you the options that are available, but also the problems that you may not know exist. What would your plan look like if you were to go all in on the annuity or partially in on the annuity?

What would it look like if you focus on the dividends? And what's the strategy if dividends were to dry up? If you had a real estate portfolio, how do you maintain your real estate? And then how do you exit out of your real estate without paying an arm and leg in taxes? If you wanted a growth focused portfolio, then how do you get through the market crashes that happen every 7 or 8 years?

And how you hedge against a flat market cycle. A flat market cycle is 10 years of basically no returns, and that's historically happened every 20 years or so. So it's a very fun and comprehensive conversation on how to blend different income strategies in retirement without feeling like you've locked up all your assets into this fixed income because that's the the quote you always hear is, oh, I'm on a fixed income. I can't do that.

Mhmm. You're right.

You don't wanna lose your flexibility, and the way you do that is focusing on growth, in my opinion. Text income right now to 913-363-1234, or go to www.retirementincome.report to request your analysis, to request your report, to request the conversation that can really open your eyes and explore your lifestyle and legacy potential, specifically in retirement. That's all the time we've got for the show today. If you enjoyed the show, consider subscribing to it wherever you get your podcast. Just search for how to retire on time.

Discover if your portfolio is built to weather flat market cycles or if you're missing tax minimization opportunities that you may not even know exist. Explore strategies that may be able to help you lower your overall risk while potentially increasing your overall growth and lifestyle flexibility. This is not your ordinary financial analysis. Learn more about Your Wealth Analysis and what it could do for you regardless of your age, asset, or target retirement date. Go to www.yourwealthanalysis.com today to learn more and get started.