What Are Strategies for Maximizing Retirement Income?
Exploring unique strategies for maximizing retirement income, we’ve gathered insights from CEOs and investment experts. From leveraging dual retirement plans to exploring alternative investment opportunities, discover the top nine innovative tactics these professionals recommend for a more prosperous retirement.
- Leverage Dual Retirement Plans
- Utilize Permanent Life Insurance
- Invest in Diverse Rental Properties
- Create Passive Income Streams
- Choose Profitable Rental Locations
- Secure Income With Annuities
- Diversify Across Asset Classes
- Implement Strategic Trust Setups
- Explore Alternative Investment Opportunities
Leverage Dual Retirement Plans
Having worked extensively with entrepreneurs through Rockerbox Tax Solutions, I’ve learned that a unique strategy for maximizing retirement income involves the strategic use of retirement and employee benefit plans, not just for yourself, but also for your business. From the array of options we’ve explored, a standout method I advocate for is leveraging a Solo 401(k) plan combined with a Defined Benefit Plan, especially applicable for those in the later stages of their career or with higher earnings.
For instance, a client who was a small business owner in his late fifties was looking to aggressively catch up on his retirement savings. We introduced him to the concept of combining a Solo 401(k), which already allows for higher contribution limits, with a Defined Benefit Plan. This approach enabled him to make significantly larger tax-deductible contributions toward his retirement—substantially more than what’s possible with standard retirement accounts. The contributions to these plans not only lowered his taxable income substantially but also accelerated his retirement savings growth thanks to the tax-deferred compounding.
This strategy is particularly effective for small business owners or self-employed individuals with no employees besides themselves and possibly a spouse. It’s an innovative way to maximize retirement contributions beyond the typical limits of an IRA or a standard 401(k), tailored to those looking to substantially increase their retirement savings later in their career. The key here lies in the dual approach: while a Solo 401(k) offers flexibility and high contribution limits, integrating it with a Defined Benefit Plan amplifies your ability to save, providing a powerful boost to your retirement income potential.
Philip Wentworth, Jr
Co-Founder and CEO, Rockerbox Tax Solutions
Utilize Permanent Life Insurance
While life insurance is foremost about financially protecting your loved ones, you could opt for permanent life insurance—such as whole life, universal, or variable life insurance policies—to help you supplement your retirement income.
Unlike term life insurance, permanent insurance builds cash value. You could use this money, which is not subject to taxes up to the cost basis, as a backup if market volatility and unpredictability reduce your retirement accounts and equity investments.
Michelle Robbins
Licensed Insurance Agent, USInsuranceAgents.com
Invest in Diverse Rental Properties
Enhancing your retirement income strategy could involve diversifying your portfolio by investing in various rental properties, like single-family homes, multi-unit buildings, or even commercial spaces. Each type of property offers its own set of benefits and challenges, allowing you to create a well-rounded income stream.
You’ll need to gain the knowledge and expertise to carefully select properties that will provide a good return on investment. This can include factors such as location, rental demand, and potential for appreciation. Another advantage of investing in rental properties as a retirement strategy is the ability to leverage financing options. This means you can use borrowed funds to purchase a property and potentially increase your overall return on investment.
It’s important to note that investing in rental properties does require proper management, so it’s essential to either have the time and skills to handle this yourself or hire a professional property manager. With proper management, rental properties can be a lucrative source of retirement income.
Brian Rudderow
Real Estate Investor, HBR Colorado
Create Passive Income Streams
Rather than relying solely on structured retirement accounts and Social Security, having additional income sources providing steady cash flow in retirement can substantially boost financial flexibility and security. This passive revenue helps cover living expenses so you can strategically draw down retirement savings more slowly.
For millennials, an effective strategy is getting into entrepreneurial ventures or building digital asset portfolios—like rental properties, e-commerce brands, royalty-generating creative works, etc.—that can eventually run semi-autonomously. Leveraging skills in areas like freelance work, affiliate marketing, or online businesses creates opportunities for relatively passive income over time.
The key is using your twenties and thirties to aggressively save while also systematically investing time and money into these revenue-generating assets on the side. By the time you hit your forties or fifties, ideally, you’ve acquired a diversified base of passive income sources, in addition to tax-advantaged retirement funds.
Brian Meiggs
Founder, My Millennial Guide
Choose Profitable Rental Locations
Investing in rental properties can be a lucrative long-term investment, as it allows you to generate income while also building equity in the property. When done correctly, real estate investments can provide a higher return than traditional retirement savings methods, such as stocks or bonds.
When choosing a rental property, the location is crucial. Look for areas with strong job growth and a high demand for rental properties. This will ensure a steady stream of potential tenants and can also increase the value of the property over time. Additionally, consider the type of rental property that would best fit your needs and budget. Single-family homes, multi-unit buildings, or even vacation rentals can all be viable options.
Once you have acquired a rental property, it’s essential to manage it properly to ensure steady income. This includes setting competitive rental rates, keeping up with necessary maintenance and repairs, and thoroughly screening potential tenants to avoid any issues with late payments or property damage.
Investing in rental properties also allows for potential tax benefits, as you may be able to deduct expenses such as mortgage interest, property taxes, and repairs. It’s important to consult with a financial advisor or tax professional to fully understand the tax implications of owning rental properties.
Justin Turner
Founder & CEO, Turner Home Team
Secure Income With Annuities
Retirement planning is often focused on saving and investing enough money to last for the rest of your life. Simply having a large sum of money saved up may not necessarily guarantee a comfortable retirement. Annuities are financial products that provide a regular stream of income for a set period or for life. They are offered by insurance companies and can be purchased either with a lump-sum payment or through periodic contributions.
Annuities offer a unique advantage in retirement planning as they offer guaranteed income, regardless of market fluctuations. One type of annuity that is particularly effective in retirement planning is the immediate annuity. With an immediate annuity, you make a lump-sum payment to an insurance company, and they guarantee you a fixed income for life or a set number of years. This can act as a steady source of income during your retirement years.
Another type of annuity that can be useful in maximizing retirement income is the deferred annuity. With a deferred annuity, you contribute to the account over time, and your money grows tax-deferred until you start receiving payments at a later date. This can be beneficial if you have a longer retirement horizon as it allows for more time for your money to grow.
Keith Sant
Founder & CEO, Sell My Mobile Home Park
Diversify Across Asset Classes
Diversification is a proven strategy for maximizing retirement income. This means investing in a variety of assets, such as stocks, bonds, real estate, and alternative investments like private equity or hedge funds. By diversifying your portfolio, you can spread out risk and potentially increase returns over time.
Not only does diversification help protect against market fluctuations, but it also allows you to take advantage of different investment opportunities. For example, while stocks may perform well in a bull market, bonds may provide stability during a downturn. By having a diverse portfolio, you can generate income from multiple sources and minimize the impact of any one asset underperforming.
In addition to diversifying within traditional asset classes, consider incorporating non-traditional assets into your portfolio, such as real estate investment trusts (REITs) or peer-to-peer lending. These alternative investments can provide attractive returns and add further diversification to your retirement income strategy.
Alex Taylor
Head of Marketing, CrownTV
Implement Strategic Trust Setups
From my experience as a tax, trust, and estate specialist, a somewhat underappreciated strategy for maximizing retirement income involves the use of specific trust setups. It’s not the first thing that might come to mind for many, but strategic estate planning tools can significantly impact retirement income, particularly when considering tax implications.
For example, a charitable remainder trust (CRT) can be an excellent way to receive income, benefit from a charitable donation tax deduction, and ultimately support a charity of your choice. In one case, we structured such a trust for a client, which allowed them to place assets in the trust, receive income for a number of years, and then have the remainder go to a charity. This not only provided them with a regular income during retirement but also significantly reduced their taxable estate, leading to considerable tax savings.
Another key strategy involves making the most out of the step-up in basis rules for inherited property. By carefully choosing which assets to hold until death and which to gift during one’s lifetime, you can significantly reduce the capital gains tax that your heirs would have to pay, potentially increasing the amount they inherit. This was particularly relevant in the estate planning process for a business owner client where, upon their passing, the value of their business was stepped up to its current market value, allowing their heirs to sell it without incurring a significant capital gains tax.
These strategies illustrate the importance of integrated tax and estate planning in maximizing retirement income. It’s not just about saving; it’s about smart planning and leveraging legal and tax frameworks to your advantage.
David Brillant
Founder, Brillant Law Firm
Explore Alternative Investment Opportunities
Finding unconventional methods of maximizing your retirement income is mainly about stocking up on various alternative investment opportunities. Investing in various alternatives to traditional investment vehicles, other than shares and bonds, allows investors to create varied income streams that could be more lucrative than conventional investments. This could be through purchasing assets to be used mainly for rental income or on lending platforms.
An individual may start a business venture that generates passive income. In the same way, other options for earning money, such as working part-time during retirement, can help increase retirement funds. The mission involves thoughtfully analyzing the risks and rewards of every investment alternative and ensuring nothing stands against one’s financial goals and risk profile. Not only being confined to standard lines but also delving into uncommon ways, one may discover some valuable opportunities to optimize financial resources for retirement.
Bill Lyons
CEO, Griffin Funding
Submit Your Answer
Would you like to submit an alternate answer to the question, “What’s a unique strategy for maximizing retirement income?”
