Building a Retiree’s Income Stream at a Younger Age

There are no shortage of discussions about how retirees can catch up on retirement savings when you one is starting later in life.  While it is obviously a very important topic for a large percentage of the Country, articles that the one linked above make me think about something related but unrelated.  I don’t want to have to depend on the type of information provided 20 or so years from now, which brings me back to a topic I haven’t thought about in way too long.

I believe that creating multiple streams of viable income provide the key to my financial success as each one created relieves the pressure from the other streams of income.  I do not believe I’ll be in a situation in the near future where these ancillary streams match my day job (both in terms of income and non-monetary factors), however, if I can build a few that provide some relief from the stress on that stream I’d be a very happy man.

Building a Retiree’s Income Early

In my very limited experience successful Retirees often have multiple streams of income regardless of whether they were intentionally created.  These streams of income include:

  • Dividend Income
  • Bond Income
  • Pension
  • Qualified Disbursements
  • Insurance based products
  • Side business / rental income

I am currently building my dividend income stream.

I do not think I’ll have the opportunity to build a bond portfolio anytime soon.  I started looking to individual bonds and I don’t think I have anywhere near the ability to research them in a manner even close to consistent as professional fund managers.  However, I am not entirely comfortable purchasing a bond fund (in any large amounts) because bond funds tend to decrease in value when interest rates rise.  Interest rates can’t go much lower.

I think it is unlikely that I’ll ever work in a position that provides a traditional pension.  Notwithstanding, I think there is some opportunity to use an insurance based product to build my own pension.  I think I should move this up in priority as it will need time to season much like a more traditional retirement account (or any investment account).

I am hoping not to include qualified disbursements as it is my hope that the above income streams provide relief to my qualified disbursement (other than mandatory minimums) much like they would my salary.

I just admitted to everyone about the business I’d like to own in the near future, but nothing is going to happen with that idea until I am done with my next home purchase.

Or maybe this entire post is moot as I am so early in my life that I have other things to worry about and maybe that is why articles like the one above exist. 

Are you currently retired? What streams do you have? am I way off base?

14 Responses to Building a Retiree’s Income Stream at a Younger Age

  1. I’m not even close to being retired because I’m in my 20s, but I’m sure having many streams of income is more sustainable in retirement than just relying on one’s retirement fund/the government.

  2. I think there’s always room for saving for retirement as a young age, but im curious as well – are we too young and just not versed well in reality and that’s why we think all this is possible?

    • No! I think it is the opposite I think our generation has seen so much. We have seen 2 HUGE market corrections, credit tightening, few recessions, etc. etc.

  3. My parents are retired and their streams are: two pensions, two IRAs, one 401(k), a lot of dividend producing stocks, social security and one annuity.

    So I think they did pretty well considering they avoided rental properties or starting their own businesses.

    • What did they do? Are they old enough to take their RMDs or are they already invading the principal of the qualified accounts?

      Sounds like they did it right! Have you started to build the streams?

    • Wow! How many units do you have? My hope is either to build a business or buy a rental property next year (after our new house purchase)

  4. I haven’t started building my retirement income other than contributing to my 401. Right now we are focused on paying our debt down and that should be complete by the time I’m 35ish. I do want to get into rental properties and definitely dividend income in the future.

    • Paying down debt is building! Think about it…with every debt paid off your net income increases as you don’t have to service that debt. That is the most exciting thing about paying off debt for me.

    • The defined benefit pension is going to become rarer and rarer…which is why I think annuities will become more popular. Shift the risk to the insurance company

  5. I’m in my mid-60’s and retired now, but I started seriously saving for retirement when I was around 30. I know it’s probably hard for young folks to imagine double digit inflation, given how moderate it’s been these past few years (decades, actually), but back in the late 70’s and early 80’s you couldn’t pick up a newspaper or magazine without reading the horrifying plight of elderly people living with small fixed incomes that were being decimated by inflation. The stories were really gut-wrenching. I wasn’t making a lot of money, but I was determined that, if I could help it, I was never going to be reduced to eating cat food to survive! I remember creating a spread sheet (by hand in those days before the PC) outlining how much I would have to save over the next 30 years to comfortably retire. I had a lot of advantages that most don’t have today in that my company provided a defined benefit plan in addition to a partial match 401k and employee stock purchase plan. I also realized early on that I would never reach my goals putting all my savings in a low interest bank account, so I wasn’t afraid to invest in the stock market. That may have been the best decision of all, because despite the ups and downs of the market, over the long haul it’s the best (and maybe only) way to meaningfully beat inflation. Any way, I followed that plan for the next 30 years, and was able to retire at 62 with a retirement income not much less than what I was earning before I retired.
    I know it isn’t easy, but even without a pension plan it’s possible to save enough for retirement without unbearable sacrifice is you’re willing to start young. But starting early is the key. If you wait until you can “afford” to save, you may wind up in real trouble later on.

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