Retirement Income Generation

[LivingAlmostLarge]

How funny that so many here are in retirement now and are closing in. It's been over 10 years. Anyway on a serious note, for those retiring, retired, close to it, how are you structuring your investments to generate income? Have you thought about it? How do you plan on investing or living?

Do you have properties and plan on living off rents? Are you planning on buying rentals and living off the proceeds? Do you plan on living off CDs? Or did you build a dividend stock portfolio? How much dividends can you produce?

[disneysteve]

I honestly haven't started working on that yet. I'm curious to hear everyone's answers.

I know that our taxable portfolio generated about 20K in income last year. It all got reinvested and we continue to contribute so by the time I retire, it will hopefully be generating considerably more than that. At that point, we can start drawing out at least some of that income rather than reinvesting it.

Our retirement accounts are a mix of traditional and Roth IRAs, 403b, and 401k so once we turn 70.5, some of those will have RMDs and some won't.

We don't own any investment properties and I don't plan to. Just not my thing. So income will come from our investment portfolio and there's always the possibility that I will choose to work in some limited capacity, most likely per diem urgent care work. Given that I'll have more free time, I may also get back into selling collectibles, something I used to do very regularly but only dabble in these days.

[LivingAlmostLarge]

I'm trying to figure out how best to structure our retirement. Granted it's at least 14 years away but I feel like I need to think about. I still can't find a rental that I like so I'm just wondering if it's easier to invest in stocks for now and then buy property like TH did for his FIL with $260K? Then it became like a bond paying out rent. I wonder if that will be worth it at that time because I was thinking it might be easier to not have to care as much about cap rate and money paying the mortgage but instead buying properties free and clear and just care about the income generation?

[corn18]

I have it all planned out and I am confident it will not go anything like I have planned. But, we should at least have a plan, right? After making a bunch of spreadsheets, reading all manner of information and using multiple planning tools, it really just comes down to 2 things: income and expenses. You are asking about income.

Income for us:

Retirement age to age 70: COLA pension
Age 70+: COLA pension + SS

That's it. I do NOT consider anything from our portfolio as "income". It is just a savings account from which I can withdraw money to cover expenses. I don't chase dividends. I am the guy who sees dividends as net neutral to growth, which is what I really need my retirement savings to do: GROW. And based on my extensive analysis, I need it to grow @ 2% real CAGR. Will I have to draw down my total savings to cover expenses? Yup. If I tried to live off dividends alone, I would have to work another 5 years to get my portfolio large enough to do that. I don't like that plan.

So, here's the plan as it sits right now (age 56 is Mar 2022):



And here is how I plan to make the withdrawals:



So why do I have so much left over at the end? Well, that is to cover Sequence of Returns Risk (SORR). While it would be fantastic if the market performed every year per its historical average, that's not exactly how it works. So I need to be prepared if equities drop 50% the first day I retire. If that happens, I don't have to go back to work and I don't have to change my withdrawal plan. At least that's the conclusion of the Trinity Study. While that's nice to know, I would probably cut back on the discretionary spending while I make a new plan. It would be very helpful (and terrifying) to know each of our dates of death. Sure would make financial planning a lot easier.

[disneysteve]

I have it all planned out and I am confident it will not go anything like I have planned.

This is the best quote ever.

[Fishindude77]

While I was working we were rather high income, so we intentionally invested in things to generate additional income for a long time. Myself and spouse 60/57 have been retired about two years.

Key sources of annual income include:
a. Farm ground approx. $27,000
b. A very part time, 1-2 day a month, low stress side gig providing leadership for a local company, $14,400
c. Dividends from stock in a company I am very close to, approx. $20,000
d. Drawing from our 401k plan, $48,000 (drawing at +/- 4% rate)

We spend +/- $140k annually, so this income covers over 2/3 of our needs, the balance is currently coming primarily from cash savings.
Probably going to take social security at about 65 for myself and 62 for spouse. These will get close to covering what the above income sources don't.
We also have significant savings in CD's and mutual funds and could easily sell off some of our real estate if more $$ was needed. Could also increase the 401k draw down a bit later in life.

[scfr]

We're getting closer to retirement. It could be anywhere from 4-9 years. We've both already cut back on the amount we work. In retirement we will live off of our savings/portfolio (mix of pre-tax and post-tax, planned initial withdrawal rate of 2.5%) and Social Security. No pension. We might work a tiny bit, if we choose to. I recently started a new job that has "sub" positions. If I'm still at the job when I retire, I still enjoy the work, and if the sub positions still exist, I'd have the option to pick up a shift every now and then if I felt like it. DH owns his own business. I have a feeling that he may continue doing a little bit of business even after he is "retired" because he likes it. But the plan is that work would be entirely optional.

But having said all of this, I'm right there with corn18, knowing that it will not go exactly as planned.

[Drake3287]

Although I retired at 55 with a healthy pension, medical benefits and a paid off mortgage, our investment's have always been a 401K, 457, CD's and a miscellaneous brokerage account. On our 401 & 457 accounts we had a magic number before we locked them into safer and more guaranteed funds, thanks to this economy we hit that number a couple years back. My brokerage account is still on the craps table but with big wins but I plan to start selling it off slowly in order to minimize taxes.

People have always laughed at my CD's (cash in general) but I literally have the last laugh even though the rates are still relatively low.