9 Ways To Earn Retirement Income

Retirement income is different than what you’re used during a full-time career. You’ll have a new set of concerns, but you’ll also have a decent amount of freedom to make your money behave the way you want. Here are nine of the most common types of retirement investment income defined.

1. A Job

You might decide that you want to keep working after you retire. This may sound like an oxymoron to some people, but a job may be the perfect thing for you to occupy your time and augment your income.

In fact, investing in freelance work or starting a business could be an excellent option if you’re planning on taking early retirement. Before a certain age, you might not have to take the minimum withdrawals from certain retirement income accounts — and that restraint could let those tax-free funds you saved appreciate even further.

2. A 401(k) or 403(b)

If you work for a moderately-sized public company, you’re probably familiar with 401(k) accounts. Non-profits would offer you 403(b) retirement plans instead, but the two are similar for you from an investment perspective.

Both structures allow you to contribute funds without paying income tax — but keep in mind that you will pay social security taxes. Both also give your employer the opportunity to match your retirement contributions. The main difference between the two is that you usually have access to matched contributions in a 403(b) much more quickly than you do with a 401(k).

3. A Pension

A pension is very similar to a 401(k) in many ways, especially since your employer would contribute toward your retirement income goals along with you. However, very few public-sector employees have this option.

4. An IRA or a Roth IRA

Individual retirement arrangements are a special kind of tax-structured account. Basically, these accounts are a way to hold stocks, bonds and mutual funds in a way that could benefit you over the long term.

Roth IRAs are also an option, as are simple and SEP types. Each of these has specific advantages as retirement income when the time comes time for you to withdraw from them. The type of IRA you choose — if any — will depend largely on your employment status and income.

5. Capital Gains

“Capital gains” is an umbrella term referring to profits you earn from selling things, such as your home or your securities. It’s usually preferable to balance gains and losses. For example, you might take a capital loss from a quick sale of a second home that you no longer wanted, thereby reducing carry costs, gaining liquidity and avoiding a higher bracket of tax penalties.

6. Dividends

Dividends are a special type of income that you could earn by owning certain types of stocks — large companies with steady income streams are the most likely to pay. Choose wisely: This type of retirement income depends on a profit-allocation strategy that competes with reinvestment and stock repurchase.

7. Interest

Interest is one of the most familiar ways that you could earn investment income. You could get interest on anything from a certificate of deposit to a checking account. Usually, the accounts with restrictions on access have a higher interest rate. One illustration of this would be the payout structure for most certificates of deposit. In general, a CD with a 1-year maturation carries a lower rate than a 10-year option.

8. A Severance Package

If you’re further along in your career, your employer might extend some kind of severance package to you. This is a way that many large companies restructure. Depending on your current salary and theterms of the offer, this could add up to quite a sizeable sum.

If a severance package is enough alongside your current investment accounts and retirement income plans, it could be a good idea to accept an early exit. However, keep in mind that you may have increased expenses after you leave, health insurance being one of the major items.

9. Securities

Securities, such as stocks, bonds and mutual funds, will probably form the foundation of your portfolio during your retirement planning stage. Stocks are shares of individual companies. As mentioned in this article, you might receive dividends from certain types of stocks — but you would usually buy them to share the success of the corporation. As the business becomes more successful, the prices of the stock typically rise.

Mutual funds are good tools if you want to maintain a diversified portfolio for a relatively small initial investment. Look beyond the holdings to make sure your choice is designed to be profitable over the long term.

Bonds are probably your best focus if you are further along in the investment timeline. These types of securities do not change value as quickly or unpredictably as the others.

Everybody’s retirement income goals are different. Selecting from these types of income and others can help you achieve your own personal goals for a happy, healthy post-career experience.










No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.  All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.