Create Revenue for Retirement

In retirement, regular and steady revenue is a better metric than net worth or the size of a stock portfolio.  The reason is net worth include illiquid assets, such as one's home, which doesn't create income to cover expenses and a stock portfolio has volatility that may decline when funds are needed to cover retirement expenses.

With 20/20 hindsight, here's what I should have done by age to build retirement revenue.

• Ages 20-40.   Save and invest for growth on a regular (e.g. monthly) basis. Use taxable and Roth IRA accounts.  Invest 90-95% in a total market index fund.  Dollar cost average and invest more funds during dips.   Do not withdraw or spend any of these funds.  With the other 5-10%, invest, buy and sell individual stock that are monitored periodically.
• Ages 50-65. Continuing saving and investing in growth.  Start converting about 7% a year to income producing options:  CDs, bonds taxable and tax free, government treasuries.  Build a stream of steady dependable revenue that can be counted on during retirement.   If you plan to retire earlier than 65, start about 15 years before retirement age.
• Choose age to start Social Security payments to create a payment amount to complements one's revenue from savings.

In my case, I depended on growth investments much too long until my early 60s.  Also, I retired early at 49, much earlier than the timeline above, right at the start of the Great Recession in 2008.  I did take  Social Security at the right time, starting at 64.  

I was lucky to have survived a 2008 retirement due to the stock market recovering over the next 15 years and some deferred compensation payments.  There was no brilliance on my part, just a lot of learning that I should have done some things a bit differently.  Luckily, in 2022 interest rates started rising, which will help maintain our revenue generation until 2028.

My post My Sources of Retirement Income showed our 2024 retirement revenue by class as:

53% Interest and Dividends in taxable accounts

27% Social Security monthly payments

20% Rental Income quarterly payments

Also, we are starting to convert our retirement accounts from growth investments to income producing investments in preparation for when we will be required to make RMD withdrawals.

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This is not financial, investment nor retirement advice. Please consult a professional advisor.

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