Achieving a secure retirement today is much different than it was a couple of decades back, as people today have longer life expectancies. Longer life expectancies mean one’s retirement savings may need to last 20 years or longer. As per Kavan Choksi, if a person is near or in retirement, bonds, annuities, and income-producing equities could be ideal instruments to earn retirement income.
Kavan Choksi Marks A Few Investment Options That Can Help Generate Retirement Income
Income annuities would be a good tool for enjoying a steady, predictable source of income in retirement, regardless of market fluctuations. It basically is a contract between a person and an insurance company. The person has to pay a sum of money, either monthly or all at once, in exchange for regular income payments. The insurance company would hold one’s contributions, but this money has the potential to accrue on a tax-deferred basis. Annuities may help people to enjoy a guaranteed income stream that is designed to last for a specific period of time. They are often considered to be a form of insurance against the risk that a person shall outlive their retirement savings.
Income-producing equities are another good option for generating retirement income. Even though people largely invest in stocks with the goal of generating capital appreciation in a portfolio, there are some equities that provide income in the form of dividends. All stocks do not pay dividends. Moreover, among the ones that do, certain stocks pay higher dividends than others. Hence, if one’s focus largely is on investing in a stock for income, it is critical to review its dividend-paying history. Stocks that steadily increase payouts or have a reliable history of income would be the most attractive to consider for this purpose.
As per Kavan Choksi, many people also follow the total return investment approach for their retirement planning. This approach provides income from investment portfolios in the form of capital gains, dividends and interest. Such a type of portfolio invests in a balanced and diverse mix of stock and bond funds. In this context, “total” return refers to utilizing a portion of the average annual returns, including both income and appreciation, over an extended period of about one to two decades. It does not involve concentrating on yearly returns or simply withdrawing income generated by portfolio holdings. The objective largely is for the total return to match or exceed the withdrawal rate.
The total return investment approach allows for the growth of a retirement portfolio to ensure it continues to support individuals planning for retirements that may span two to three decades, or even more. It offers a way to potentially achieve a stronger total return compared to conventional retirement investment strategies. This approach can meet immediate cash flow needs while also helping to grow savings for future expenses, which are expected to rise over time due to inflation. Moreover, it also enables the use of a wider range of assets than more traditional retirement income methods, and it provides a stream of withdrawals primarily through capital appreciation, which can be a more tax-efficient income source.
