Retirees: Make Your Money Last With Stable Income Strategies
To avoid running out of money in retirement, you need to be able to generate reliable income — without relying on Social Security. Passive income is the key.


Creating steady income streams is the key to financial stability in retirement. A recent report from the National Institute on Retirement Security found that 55% of Americans fear they can’t achieve financial security in retirement. Historically, retirees have been able to rely on pensions and Social Security for income, but times are changing. According to this year's annual Social Security and Medicare trustees report, it’s estimated that retirees will receive only 83% of their benefits beginning in 2035. With the fate of these programs unclear, it’s becoming increasingly important to generate multiple income streams of your own in retirement.
As you’re planning for retirement, it’s important to understand the difference between active income and passive income. Think of active income as an exchange. It’s the money you’ve earned in exchange for your time and services. Passive income is the opposite. It’s earned from income-generating assets, such as dividends and interest income, rental income and capital gains on stock investments or real estate.
During your working years earning active income is the focus, but in retirement, earning passive income should take priority.
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Earning passive income requires you to change your approach when investing. During your working years, you’re typically investing for growth. The hope is that your assets will increase in value. But as you get closer to retirement, the goal is to have your assets increase in value while also providing you with income.
Earning passive income through real estate
There are several different investments you can make that can generate income. One common method is getting involved in rental real estate. According to data from Pew Research, 72% of single-unit rental properties are owned by individuals. Investors who buy and hold rental property profit from recurring rental income and any potential gains from appreciation when the property is sold or refinanced.
If you’re not interested in administering your own real estate rentals, you can join a real estate investment trust (REIT). A REIT is a company that owns and operates real estate to produce income for stakeholders. REITs include multistory building rentals, office spaces and malls. The investments are long-term, and the goal is to generate income through holding, leasing and renting.
Other passive income possibilities
Aside from real estate, investing into savings accounts, CDs and money market accounts are other options for generating passive income. The rate of return for each varies, but these options have lower risk, which works well for people approaching or in retirement. In addition to being low risk, these investments are typically insured by the Federal Deposit Insurance Corporation (FDIC).
Three withdrawal methods to consider
Identifying multiple passive income streams is only a portion of your income planning. The next step is to create a strategic method for withdrawal. There are several withdrawal methods to choose from, but the strategy you pick should align with your risk tolerance and income needs.
One withdrawal method is the systematic withdrawal strategy. This strategy involves withdrawing a fixed amount regularly from retirement accounts, such as a set percentage of the portfolio balance annually. This method provides a steady stream of income, but it doesn’t account for market fluctuations or changes in expenses.
Another approach to consider is the bucket strategy. With this method, retirees divide their portfolios into different “buckets” based on their time horizon and risk tolerance. Short-term buckets hold cash and investments for immediate expenses, while longer-term buckets hold assets with higher potential returns.
Retirees with tax-deferred accounts, such as traditional IRAs and 401(k)s, also have the required minimum distribution strategy at their disposal. Once you reach a certain age (currently 73, but rising to 75 in 2033), the IRS requires you to take RMDs from these accounts. By using these withdrawals as a baseline, retirees can plan additional withdrawals as necessary.
A different kind of retirement income strategy
Some workers may choose to approach retirement a little differently. Instead of retiring all at once, the staged retirement strategy gives workers the option to gradually transition from full-time work to part-time or consulting roles. While this method falls into the active income category, it can help supplement retirement income while delaying the need to draw down retirement savings.
Creating a plan that provides you with financial security and stability is essential for those hoping to retire. A solid plan can give you peace of mind in the face of market volatility and uncertainty surrounding the future of Social Security. To ensure your income plan meets your needs, consider meeting with a financial adviser. They can give you more information about the various income streams and withdrawal methods that are available, helping you pick an option that works best for you.
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Joel Russo is a New Jersey native and has been in the financial services industry for more than 35 years. He is dedicated to helping his clients reap the rewards of a well-planned retirement. Unlike many financial professionals, Joel specializes in the retirement market, "the over-50 crowd” and has dedicated his practice to educating this community with workshops on topics relating to income from the right sources, taxes in retirement, RMD pitfalls and legacy planning.
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