How to create retirement income

I think a lot of people today think of retirement as maintaining your wealth after you stop working so you do not run out before your time has come and you have wealth to pass on. Once you are retired you need to find a new source of wealth since your income stream will have most likely changed. A question retiree’s will ask themselves is,”How long will my retirement money last; and will it be enough to maintain the lifestyle I want?” These types of questions can be answered by thinking of “how do you make money in retirement?” or “how do you use your retirement to bring in passive income?”

Most people are used to investing their money for small to decent returns in the stock market. However, there are other options, such as using a self-directed IRA for investments. This way your investments can be income producing, while still remaining in your IRA, so you can continue to receive your current benefits and grow as well. Now, you may be asking yourself “what is a self-directed IRA and how does it benefit my retirement?” 

  • A self-directed IRA is simply an IRA account that can be used for alternative investments outside of the typical stocks, bonds, mutual funds and CDs.
  • The alternative investments include: real estate, Purchase and invest in properties to rent or sell Owning land and renting for agricultural use or development private placements, Investing in private companies Investing in energy ventures such as oil and gas and precious metals. Purchase gold or other precious metals that hold or gain value
  • You are able to roll over from an IRA to a self-directed IRA without any taxes or penalties.
  • The benefit of using a self-directed IRA is that it allows you to diversify your retirement. Additionally, you may receive the same tax benefits and advantages of your IRA or 401k with a self-directed IRA and get the added benefit of investment diversification by being able to invest in alternative assets.
  • This way you can diversify without losing your money. Diversification allows for stability since you will have money in multiple markets and they all won’t lose money all at one time.

As we have seen time and time again, market volatility due to fundamental events in the markets and government can lead to significant losses unless you prepare with investments in more than one area in case one declines. We can see in our current market it has not only shown significant volatility over the past several years, for example, the 2008/2009 decline; but it continues to show signs of increased volatility with the current trade war with China, and the upcoming election. 

Since we understand the need to create income in retirement, we need to now ask “what are income producing assets?” Income producing assets are:

  • Royalties earned in private placement, such as investing in oil remediation technology that removes oil from sand and profits are distributed to investors in the form of royalties. A royalty is simply a payment made by one party from another that owns a particular asset, for the right to use that asset.
  • Dividend producing assets which include, investing in businesses or private companies and revenue is distributed in the form of dividends. A dividend is a payment made by a company to its shareholders, usually as a distribution of profit. They are how a company rewards its shareholders for their continued investment.
  • Value gained by owning precious metals. It is another avenue to secure your retirement because there is always a demand so the value is not going to drop significantly and it is more likely to gain value over time. The value of gold and other precious metals typically goes up when the value of the US dollar drops. This would give you more security as gold prices could move up more during a recession or stock market crash as they have done in the past. It is a way to reduce risk in an uncertain economy and the market tends to fluctuate more during election years.

After having these questions answered, you should have a better understanding of how to make your retirement savings last. The key takeaway is that you can maintain your retirement by diversifying your investments. Although this may seem daunting to some people, this is the best time because during your retirement you actually have more freedom to create income without working by making thoughtful and strategic investments. If you are someone who is retired or close to retiring, and you need further understanding of how to make these options work for you, please reach out to us at info@blackstonecommodity.net and one of our representatives will contact you.