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.
From just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
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.
Related Content
- No Kids to Rely On? Seven Things Solo Agers Must Do Now
- How You Can Tackle Health Care Costs in Retirement
- Can Both Spouses Collect Social Security Benefits? What You Need to Know
- Taming Risk: Offensive vs Defensive Investing Strategies
- Why Ground Lease REITs Are Building in Popularity
-
How to Avoid the Financial Quicksand of Early Retirement LossesSequence of returns — experiencing losses early on — can quickly deplete your savings, highlighting the need for strategies that prioritize income stability.
-
How an Elder Law Attorney Can Help Protect Your Aging ParentsIf you are worried about older family members or friends whose financial judgment is raising red flags, help is out there — from an elder law attorney.
-
Q4 Post-Mortem From an Investment Adviser: Year of ResilienceFinancial pro Prem Patel shares his take on how markets performed in the fourth quarter of 2025, with an eye toward what investors should keep in mind for 2026.
-
This Is How Early Retirement Losses Can Dump You Into Financial Quicksand (Plus, Tips to Stay on Solid Ground)
Sequence of returns — experiencing losses early on — can quickly deplete your savings, highlighting the need for strategies that prioritize income stability.
-
How an Elder Law Attorney Can Help Protect Your Aging Parents From Financial Mistakes
If you are worried about older family members or friends whose financial judgment is raising red flags, help is out there — from an elder law attorney.
-
Q4 2025 Post-Mortem From an Investment Adviser: A Year of Resilience as Gold Shines and the U.S. Dollar Dives
Financial pro Prem Patel shares his take on how markets performed in the fourth quarter of 2025, with an eye toward what investors should keep in mind for 2026.
-
Is Your Emergency Fund Running Low? Here's How to Bulk It Back UpIf you're struggling right now, you're not alone. Here's how you can identify financial issues, implement a budget and prioritize rebuilding your emergency fund.
-
An Expert Guide to How All-Assets Planning Offers a Better RetirementAn "all-asset" strategy would integrate housing wealth and annuities with traditional investments to generate more income and liquid savings for retirees.
-
7 Tax Blunders to Avoid in Your First Year of Retirement, From a Seasoned Financial PlannerA business-as-usual approach to taxes in the first year of retirement can lead to silly trip-ups that erode your nest egg. Here are seven common goofs to avoid.
-
How to Plan for Social Security in 2026's Changing Landscape, From a Financial ProfessionalNot understanding how the upcoming changes in 2026 might affect you could put your financial security in retirement at risk. This is what you need to know.
-
6 Overlooked Areas That Can Make or Break Your Retirement, From a Retirement AdviserIf you're heading into retirement with scattered and uncertain plans, distilling them into these six areas can ensure you thrive in later life.
