As a retired 24-year financial advisor, I’ve seen my fair share of complicated answers. There were answers that never really answered the question and there were answers that were so complicated that it left your head spinning and you almost wished you’d never asked. Welcome to the investment world. Where even the smartest of people go cross eyed with all the technical terms and jargon.

My goal is to simplify the early retirement process for you and that is why I created DIAL into Early Retirement™. This week we discuss the second of four core financial pillars that you need in place in order to retire early.

INCOME

Having income in retirement is crucial because without it, you’re not going to have legs to stand on month to month with costs and expenses. Income can come from various sources such as brokerage and retirement accounts, real estate, annuities, businesses and of course pensions and social security in the future.  Or, perhaps you’re working on your terms at a part-time job or a hobby that you’ve turned into an income producing venture a set handful of hours each week. I know many folks who do this to keep themselves in a routine they like and to feel productive.

Ideally, you want to have several streams of income when you retire early.

For example, you might need $2000 a month to live off of in retirement. You have a pension that pays you $500 a month which is guaranteed to pay you the rest of your life. You then tap into your brokerage and retirement accounts and that provides you another $1000 in monthly income. So far, you have $1500 a month but that leaves you with a $500 a month income gap. Because you are planning to be on the road traveling the next two years in retirement, you temporarily Airbnb your home and that gives you another $900 a month of income. You have successfully covered your expenses of $2000 a month and have a $400 a month cushion.

The more stable the income, the better. There are only three guaranteed lifetime income streams available today:

– Pensions
– Social security
– Annuities

Income from your brokerage and retirement accounts tend to be secure but you want to be careful when the stock market takes a tumble. Real Estate is another great source for income.

What’s not a stable income? Example:  When you decide to sell your business and owner finance your business to your half-witted brother-in-law. You’re expecting a check in the mail every month while your brother-in-law is running the business in the ground. Owner financing a business is a great way to generate income, but you want to be careful who you sell it to and the outlook on the success of the business with you not being there. I’ve seen some folks suffer through this process, so be careful and look ahead so you have peace of mind.

We’ll discuss more about income and how to generate income at greater length in the near future.

The key here is to have multiple streams of income. So, start thinking along those lines. Having one great stream of income is fine as long as it’s stable, predictable and not going away, but multiple provides more stability.

Live free my friends