I’m 62 and will be turning 63 next month. I’ve been self-employed for most of my career and currently own a home that I rent out. I’m now considering investing in another property to help strengthen my retirement plan. Since I don’t expect to receive much from Social Security, I’m looking for strategic and secure ways to invest my money and generate reliable income during retirement. What would you suggest?
Generating reliable income is one of the most common goals among future retirees, so you are certainly not alone in raising this question. While everyone will arrive at a different solution that meets their unique needs, everyone should start with a plan before deciding how and where to invest. We’ll walk through why I think this is the case before outlining some income-oriented investments you can consider.
If you need help selecting investments and planning for retirement, speak with a financial advisor.
First things first, you should start with a plan. Even if you’ve done some planning already, a comprehensive financial review can help point you to the right solution. While generating income in retirement may be a goal, it should be addressed within the context of your overall financial situation-not in isolation.
Not to sound extreme, but I believe it would be negligent to pick investments without taking a complete inventory of your finances. You can start by answering the following questions:
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What assets and liabilities do you currently have besides the home you rent out?
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What income do you earn from self-employment, and how consistent is that income?
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How much longer do you expect to work?
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What are your anticipated income streams in retirement besides the small Social Security payments you expect to receive and rental income if you keep the property?
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How much do you currently spend annually and how much will you spend in retirement?
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Do you have a spouse and/or dependents?
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What is your current health situation and expected longevity?
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Do you have any legacy or charitable goals you wish to fund?
It’s worth answering these questions before choosing any investments-especially a big-ticket rental property. Your responses can clarify how much income you’ll need in retirement, how much risk you can take and what time horizon you’re working with.
From there, you can select investments that you expect to meet your income (or total return) needs and fit your risk tolerance.
(And if you need help doing a holistic review of your finances or creating a financial plan, consider working with a financial advisor.)