Retirement Strategies for High-Income Earners

Retirement Strategies for High-Income Earners


I’m sure you’ve taken a moment to envision the lifestyle you hope to enjoy during retirement. It might include things like traveling more, going out to eat with friends and family, or playing more golf. That is a great first step in planning for retirement—setting specific goals for what you hope to accomplish and what you would like to do in retirement.

Next, you will have to create a plan for how you will generate the income you will need to pay for those fun activities, without having to work for it. In other words, you need a plan for how you will establish retirement income you can count on.

One example of retirement income is Social Security. The thing is, Social Security was never intended to provide all the income retirees will need. That is why it is important to have your own retirement income plan to help you generate the additional income you will need to enjoy retirement.

In other words, it’s all about taking what you’ve accumulated in your 401(k)s, IRAs, and other investment accounts and preserving those funds so you can use them to establish reliable streams of interest and dividend payments. 

By shifting your focus from trying to grow your investments to earning steady income, you can increase the odds that you will be able to enjoy a more comfortable and active retirement without having to cannibalize your retirement savings to do so. 

Retirement Income Investment Strategy


There is no single retirement income investment strategy that is right for everyone, but there is an important shift in strategy that makes sense for those who are within 10 years of retirement. During my 30 years in the industry, I would say that about 90% of investors fail to make this critical shift on time. 

You see, during our working years, we are in the accumulation phase of our lives where we try to save as much money as possible with the goal of growing our money; that way we can enjoy the retirement we envision for ourselves. For many, that means hoping for Growth in an unpredictable stock market. Since, at this point, retirement is still many years away, if we do experience a loss due to a market correction, we still have time for the market to recover before we need that money. 

However, as we near retirement we lose the luxury of being able to wait 10-12 years for the market to bounce back. That’s why it’s so important for those approaching retirement to make that critical shift from focusing on growing their savings to maximizing the amount of income their investments can generate for them.

If the transition from investing for Growth to investing for Income is done too late and you get caught in a stock market correction, you could be forced to retire on a lot less income. Even worse, you could have to work longer than you wanted. Though if you can make the transition to investing for income ahead of retirement and we do experience a major market correction after you retire, you would be better positioned to ride out that drop since you essentially “locked-in” the interest and dividends that your retirement savings can generate for you.

Making this one single shift in your investment strategy can mean the difference between having a retirement that’s stress-free with plenty of income you can count on versus having a retirement that could potentially be a financial disaster.

Income in Retirement—Common Investment Strategies


Many stock market-based financial advisors will tell you that the best way to achieve your financial goals for retirement is to invest for growth in the stock market. The problem with following a growth-based investment strategy once you enter retirement is that the growth you are counting on could turn into a loss or series of losses as a result of a market correction.

What many growth based advisors won’t tell you is that there’s another way: investing for income. That doesn’t mean that you’re limited to annuities. In fact, the universe of income-generating investments is much larger and more diverse than growth-oriented investments. Here are just a few examples:

  • Municipal Bonds—debt securities issued by state and local governments to fund public works including things like parks, roads, libraries, or other infrastructure.

  • Corporate Bonds—debt securities issued by corporations.

  • Preferred Stock—a class of equities that have a fixed dividend and a par value. If the market value of the shares drops below the par value, investors will still receive the fixed dividend payment. Also, if that company ever wants to redeem or call those shares, those shares get called back at par value

  • Business Development Corporations (BDCs)—although BDCs do not have a par value, they do have loans to businesses inside their portfolios, and those loans have a par value.

  • Certificates of Deposit—many people forget that CDs are another type of fixed income investment. They pay a fixed rate of interest and once the term of that CD is up, the investor receives all their principal back.

These are just a few examples of income-generating investments available. If you are interested in learning more about the fundamentals of investing for income, check out: The Definitive Guide to Retirement Income: 9 Things You Need to Know about Retirement Income.

Best Retirement Income Streams


As we mentioned, there are many ways to earn income in retirement. To us, the best retirement income streams are those that are contractually obligated to be paid to you.

For example, individual bonds. Bonds are debt instruments issued by corporations, municipalities, and governments. When you buy a bond, you are lending your money to a corporation or government for a set period of time and in return, the issuer of that bond provides you with two important guarantees (assuming there are no defaults):

  1. A guaranteed a fixed rate of interest for the life of the bond
  2. When the bond matures, you’re guaranteed to get the par value back


With these two guarantees, those who place their money in individual bonds can know how much interest they will earn, and when they can expect to receive it. This is one of the reasons why many believe that income streams generated by investing in individual bonds or other bond-like instruments are the best retirement income streams.

Best Retirement Income Strategies 


We don’t retire to skimp and save. We retire to be able to enjoy the things we didn’t have time for during our working years. In our opinion, the best Retirement Income Strategies are those that allow you to establish a renewable source of retirement income.

One of the biggest sources of stress between spouses in retirement is financial stress. Think about it … if every time you want to go out to eat or travel you have to worry about where the money will come from, it can take the fun out of those activities and place added stress on your relationship.

However, if you invest in a manner that provides you with consistent interest and dividend payments, it can help to relieve financial stress and give you permission to occasionally treat yourself during retirement. Whether it’s to take your family on an extended vacation, to remodel your kitchen, or to buy that classic car you’ve always wanted, investing for income allows you to enjoy retirement without having to second guess every expense.

Retirement Income Strategies Once Your Portfolio Reaches $500k

Just like there is no one-size-fits-all solution to planning and saving for retirement, there is no magic number or amount you need to save to achieve a more comfortable retirement. But, by having accumulated $500,000, you’ve made an important first step in achieving the retirement you deserve.

The secret now is to avoid unnecessary risks so you can help preserve your savings and use it to generate ongoing income that is not dependent on stock market growth. A great way to do so is to make sure you are working with a financial advisor who is a fiduciary, and preferably one who specializes in retirement income.

Click here to schedule a complimentary, no-obligation consultation to make sure you’ve done all you can to help maximize the amount of retirement income your investments can generate for you.

When Income is the Primary Focus

Help Maximize Income in Volatile Markets: Strategies for Risk Management

Building a Sustainable Income Stream with a Differentiated Approach: The Sound Income Strategies Method