Each week on my show The Income Generation, we cover topics that are important to those who are retired or nearing retirement. Often, viewers have questions. That’s why The Retirement Income Store’s social media pages include an Ask Dave forum – which I’m happy to be able to share with you.
Today’s question:
“Dave, I would like to know more about less-risky income-producing investments for the future. What are my options?”
The answer here depends on how you define the term ‘less-risky.’ Some people will have a higher risk tolerance than others based on their financial situation, goals, and personality. If you don’t want to take any risk at all, you’re basically limited to Bank CDs, government bonds, or some form of fixed annuity. It’s important to understand that with each of these your return will be limited to a certain degree.
Now, if by ‘less risky’ you mean less risky than traditional growth-based stock market investments, you’ve now opened up your options to things like investment-grade corporate bonds and preferred stock.
Risk is obviously an important consideration when it comes to investing, since no investment is 100% risk-free. However, it’s important to understand that there are different types of risk. With certain income-based investments, you might be willing to risk fluctuations in the value of your principal as long as your rate of income doesn’t change. You also might be willing to risk changes to your income in exchange for the potential of additional growth.
In my experience, most advisors don’t really understand the nuances involved in these various types of risk or how to mitigate them. Why would they? Most advisors focus on aggressive growth-based strategies where the notion of risk is much simpler: if the stock market shrinks by 50% or more, as it has twice in the last 20 years, so does your retirement savings.
This isn’t to say you can’t stay invested in the stock market after you’ve switched your strategic focus from growth to income. After age 50, an actively-managed portfolio of high dividend-paying value stocks can be a more practical approach than your traditional growth-based stock market investments.
If you are interested in learning if high-dividend value stocks might be right for you, make sure to download our free report: Investing for Income in the Stock Market.
Investment Advisory Services offered through Sound Income Strategies, LLC, an SEC Registered Investment Advisory Firm. The Retirement Income Store® , LLC and Sound Income Strategies, LLC are associated entities.