Friday, June 17, 2011

Secure Retirement Income - multiple income streams

Multiple income streams are very important in retirement.  Think of multiple income streams as income diversification.    Just as investment diversification among industries is important to protect against capital loss should one industry have trouble, having multiple income streams helps to protect against loss of income.

No one can guarantee your income.  Do you believe social security is safe?  Do you think Bernie Madoff’s investors thought their income was safe?  Do you think a United States bond is safe?  Do you actually believe that an insurance company that guarantees an annuity income is safe?  How about a gift to a University or other charity; do you think that income is safe?

Look, most of these entities are safe but any one of them can default.  Yet it is highly unlikely that all would default.  Therefore, if you have diversification of your income streams you have more safety.

Planning for multiple income streams begins early in life.  Start by participating in every pension or retirement plan offered by your employer.  If you have multiple employers over life, keep track of those funds.  If you work for one company your whole life, do not keep all your retirement assets in that company alone.  Work with the benefits department to diversify those investments.  If none of the companies you work for offers retirement benefits, you must … I repeat, you must, put away some money out of every paycheck for your old age.  Every person who works can contribute to some kind of an IRA.  Which IRA you choose is the subject for another day.  Just be sure to begin early by saving for retirement.

Government and municipal employees have another advantage.  They tend to be able to retire early and are young enough to get another job.  I know of a fellow who worked for the government, was resourceful enough to work at part time non-government jobs so that he qualifies for social security and now that he retired from the government, he is working for a university teaching his skill. 

His wife worked for the public school system until she retired and is now working for a private school.  Together they will have (1) his government pension (2) her school pension (3) his social security (4) her social security (5) a small pension from the university and  (6) income from the IRA she set up while working for the private school.  That is what we call multiple streams of income.

Start early, use all retirement savings plans available to you, and keep track of them all.  This is the safest way to secure a reliable income stream.
Very Truly Yours,
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