Four Strategies for Secure Retirement Income

William Baldwin of Forbes looked for ways to generate $40,000 annually for 25 years, taking very low risk. All the strategies work, though some are harder to implement than others. Of course, the costs vary. One point to consider is that there’s no inflation protection. Another point is that the cash flow isn’t all income and capital gains. It also includes a return of some or all of your principal, so you could run out of money after 25 years. If nothing else, it’s a good thought exercise, and some of the ideas you aren’t going to hear from your average financial professional.

The purpose of this exercise is to help someone who has just turned 70 liquidate an IRA. Not long after you pass that age, you have to start pulling money out. It wouldn’t be a bad idea to use your IRA to create a guaranteed income stream, lasting to age 95, to cover basic expenses like food and rent.

“Income” is used loosely here to mean a flow of cash. It does not mean profit. Most of the annual 40K you’re hauling in is returning principal. The interest income on safe fixed-income portfolios is very meager. For that you can thank the funny-money people at the Fed.