9 Ways To Generate Retirement Income
A CD is a Certificate of Deposit issued by a bank. They are usually FDIC
insured and the longer the term of your CD, the higher the interest
rate you'll receive.
Pros: Principal is safe.
Cons: This
strategy will generate little current income. Income varies with
interest rates as CD’s mature and are renewed. Income may not keep pace
with inflation. Depending on interest rates, it may require a large
amount of capital to generate the amount of retirement income you need.
Interest from CDs is 100% taxable unless you own the CD inside of an IRA or Roth IRA.
When it comes to choosing between safer investment alternatives take the
time to learn how they could be used for part of your portfolio rather
than for ALL of your portfolio. In this way you could use other parts to
invest in things that are more likely to deliver higher income amounts.
A bond, like a CD, has a maturity date. You can buy bonds (or CDs) now
so that they mature at various future points when you are most likely to
need the income. There are many, may types of bonds so you can choose
safe government issued bonds, or higher yielding corporate issued bonds.
Pros: Bonds
are likely to provide more income than a CD or other super safe option.
You can match bond maturities with cash flow needs.
If you're at a high tax rate you can use municipal bonds which are likely to deliver tax-free income to you.
Cons: Income
may not keep pace with inflation. Depending on interest rates, it may
require a large amount of capital to generate the amount of retirement
income you need.
Building a bond portfolio can be difficult to do on you own, so, it is
important to understandhow to invest in a bond ladder before buying
bonds randomly.