A client in his seventies recently sat across from me, voicing a worry that many retirees share: “I don’t have enough retirement income.” After retiring from a successful career, his income took a significant hit. Despite receiving a 7-figure inheritance, he was reluctant to spend it. He wanted to boost his income without risking his nest egg. If this sounds familiar, know that there are strategies to enhance your financial stability without taking on unnecessary risks.
The Risk of Relying on Interest
One thing my client was adamant about? Not touching his principal. “I just want to live off the interest,” he said, assuming this was the safest approach. But while it feels secure, depending only on interest and dividends comes with serious risks that can undermine your retirement plans.
Interest rates and dividend payouts are unpredictable. If rates dip, your income may no longer cover your expenses, leaving you scrambling to maintain your lifestyle. My client faced exactly this issue—his income had become insufficient as rates fluctuated. This strategy can also restrict your investment options, often sidelining opportunities for growth that could increase your overall wealth.
Unlock Income Without Fear
Many retirees, like my client, fear spending their savings. It’s natural to want a safety cushion for unexpected expenses or to preserve an inheritance for your children. However, this fear can actually prevent you from enjoying a secure and comfortable retirement.
Carefully planned withdrawals from both interest and principal can be a game changer. By setting up a diversified investment portfolio designed for both income and growth, you can establish a reliable monthly withdrawal plan. This reduces your dependency on the unpredictability of interest rates and offers a steady income.
Even better, a well-managed portfolio has the potential to grow over time. This approach balances your need for current income with the goal of long-term wealth preservation, ensuring you can enjoy life now while still providing for your loved ones later.
Note: This is for educational purposes only and is not intended as financial, legal, or tax advice. Please consult a professional for your specific situation.
Focus on What Matters
“What’s most important to you in retirement?” I asked my client. He thought for a moment and answered, “Maintaining my lifestyle, making sure I don’t run out of money, and leaving something for my kids.” These priorities helped shape our investment strategy.
One key concept I introduced was total return. This focuses on the overall growth of your portfolio—combining interest, dividends, and capital appreciation—instead of just income from interest and dividends. With a total return approach, you can enjoy consistent income while still giving your investments the chance to grow.
We also considered the risk of inflation. Relying solely on fixed-income assets can erode your purchasing power over time, making it harder to meet your future needs. A balanced portfolio, which includes equities alongside bonds, CDs, and other fixed-income investments, can help combat this by incorporating assets that have the ability to outpace inflation.
By embracing a total return strategy and diversifying his investments, my client found a more reliable and potentially growing income stream. This realignment allowed him to maintain his lifestyle and achieve peace of mind, knowing his financial future was secure. It also kept the door open for leaving a meaningful legacy for his children.
Taking that first step to boost your retirement income doesn’t have to be overwhelming. If you’re worried about how to keep up your lifestyle and protect your financial future, read this short piece, Do You Want More Income from Your Investments?, by clicking here. Discover practical strategies that could make a difference today.
Douglas Goldstein, CFP® is the director of Profile Investment Services, Ltd. www.Profile-Financial.com. Securities offered through Portfolio Resources Group, Inc. Member FINRA, SIPC, MSRB, FSI. The opinions expressed are those of the author and not those of this website, Portfolio Resources Group, Inc. or its affiliates. Neither Profile nor Portfolio Resources Group, Inc. or its affiliates, provide tax or legal advice. Nothing in this article is intended to be investment, tax, or legal advice. Information in this article is gathered from sources considered reliable, but we cannot guarantee their accuracy. Past performance is no guarantee of future returns.
