7 Ways to Guarantee Yourself a Steady Retirement Income

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Relieved and relaxed retiree living happily in retirement outdoors
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If you want a smooth retirement, it’s not enough to simply tuck away part of your paycheck during your working years and worry about the rest later.

You must make sure money will keep flowing when you need it and make plans to weather an unpredictable future.

The sooner you look at options, the more bumps you can avoid on your retirement ride. Here are some ways to plan ahead to ensure you have a reliable income in retirement.

1. Create a Social Security claiming strategy

Social security card with a fee schedule and a calculator
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Social Security is often the first thing people think of when it comes to retirement income. After all, it’s a steady income we receive that grows with inflation without our needing to take risks. And it’s largely automatic.

But you still must have a claiming strategy in place long before you need it to maximize your lifetime benefits.

While you can begin claiming Social Security as early as age 62, you’ll have a permanently reduced monthly benefit if you do. On the other hand, if you wait until age 70, you’ll get the maximum monthly payout for which you are eligible.

That doesn’t necessarily mean you should wait until you’re 70 — there are times when doing so doesn’t make sense. So, look at the numbers and find out what will work for you, far in advance.

2. Find a job with a pension — if you can

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Although 401(k) plans are one of the most popular retirement savings vehicles today, they only really burst onto the scene in the early 1980s. Before that, millions of American workers had a very different retirement benefit: a pension.

With pensions, you build up the benefit over your working life and then receive a guaranteed monthly check during retirement.

Pensions are much rarer these days, with only about a quarter of employees saying their employer offers this benefit. But if you have the time (you may have to work a minimum number of years to be eligible) and the opportunity to take a job that offers one, it could still be worth pursuing.

Government jobs and companies with strong unions are the first places to look, but some big companies still offer pensions too.

3. Consider a reverse mortgage

Reverse mortgage
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This is still a mortgage on your house, but the money is flowing in the other direction — to you. In effect, you are borrowing money and using your home as security.

Reverse mortgages can be structured in different ways, including as monthly payments, a lump sum or a line of credit. You don’t have to repay the loan until you leave the home. And if you die before then, the house will be sold to pay off the loan.

Reverse mortgages are not right for everyone, but they might provide a steady source of income if you have a lot of home equity and don’t plan to leave the house to your family. You have to be at least 62 to take a reverse mortgage.

4. Look into annuities

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Annuities are basically investments made through an insurance company. They come in a few flavors: immediate, deferred and variable.

With an immediate annuity, you turn over a lump sum of cash to the insurance company. In return, you receive monthly income, which may be paid out for a fixed number of years, the rest of your life or the lives of you and your spouse, depending on the annuity plan.

A deferred annuity works like a certificate of deposit from a bank. The money you pay in earns interest, and you get paid back at a future date, as you would with a matured CD.

A variable annuity is similar to a mutual fund: Your money may be used to invest in stocks, bonds or a mix of the two. However, instead of investing through a mutual fund company, an insurance company sponsors the variable annuity.

However, always look at the costs involved in any type of annuity.

5. Build a bond ladder

Series I U.S. government savings bonds
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The idea of bond laddering is to divide up the money you’d like to invest in bonds and stagger it across different time frames so you can enjoy a range of interest rates while creating predictable income.

In the past, Money Talks News founder Stacy Johnson has explained laddering — and a similar approach known as a “barbell strategy” — as follows:

“If you need more income, create a bond ladder or use a barbell strategy. ‘Barbell’ refers to having some money in really short-term bonds so you’ve always got something coming due, then having some in longer-term bonds or funds that pay higher rates. ‘Laddering’ refers to having bonds in various maturities, like steps on a ladder, that accomplishes the same thing.”

Each time one of your bonds matures, look at current yields. Then, decide how to reinvest the money from that step or “rung” — either in bonds or elsewhere.

You can also ladder CDs or even annuities.

6. Use the 4% rule

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This isn’t an investment strategy so much as a withdrawal strategy, squarely aimed at ensuring consistent income without leaving you short in your later years.

The popular rule of thumb is to withdraw 4% of your nest egg in your first year of retirement, and then hold to that amount — adjusted for inflation each year — to make it last the rest of your life.

The strategy is not foolproof. The practicality of living on that amount depends largely on the size of your nest egg entering retirement and the strength of your portfolio.

You can’t control the economy, but you can look at the math for a 4% annual withdrawal and start tucking away more now to achieve a realistic number later.

7. Dividend stocks

Older woman smiling with lots of extra money
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If something “pays dividends,” it provides future benefits. But that’s not just a turn of phrase — some stocks pay dividends in a very specific way.

Cleverly named dividend stocks are from companies that pay shareholders part of the company’s profits, usually quarterly. Those stocks still function like any other, able to rise or fall in value. But they also provide an additional source of steady income. Learn “How to Find the Best Dividend Stocks, Step by Step” by listening to the Money Talks News podcast.

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