Got to thinking about it the other day and realized, hardly anyone diversifies their retirement. I'm not talking about the 401k. Obviously its investments are diversified. I mean multiple income streams:

I'm thinking a great plan would be:

Get a healthy 401k so you have some interest bearing income when the economy is ticking.

One spouse works a job with a pension plan so you have a "known income".

Third, mailbox money in the form of some kind of residual income. That's the one I'm currently trying to find now.

I'm fortunate that I have a strong back and some construction knowledge. On top of that, I have some extra funds to pour into a construction project that I can hopefully diy a portion of.

Two thought provoking questions:
Does anyone think this way about retirement? Surely I'm not the first, I've just never heard anyone advise about multiple income streams for retirement.

Anyone have good ideas for a residual income project? Obvious ones are rental property, short term rentals, etc. What else is out there that I'm not seeing? Hopefully this thread gets several people on a good path.

If you work with an advisor close to retirement, that should be the bulk of your conversation. Diversifying your income is foundational to a solid income replacement plan in retirement.

- interest on CD's and MM
- interest from bonds
- dividend income from companies that have a history of increasing their dividends YOY for inflation protection
- Engineered income: from mutual funds if you choose
- annuity income (multiple options) - not correlated to the market and insures an income stream until death.
- rental income: if you own the property free and clear.

You don't need to include every option listed above, but a combination of what's listed above is most common.

Yes, the past year I've thought of it the same way you are. I've invested in some multi family syndications, and about to invest in some mineral rights and an ATM fund. These 3 will provide passive income that I will continue to reinvest and hoping it allows me to possibly even retire early.

REITs. The private ones got a bad rap lately with some folks having trouble getting their money out of them last year. The public ones are available on the stock exchange. Good dividends on a lot of them.

I am a big proponent of passive income. On top of my stocks, my goal is to cashflow my current income from vehicles that generate cashflow that requires little work.

1. Business that produce income without being involved
2. Apt syndications - currently passive
3. Rentals - Eventually passive, I spend about 10 hrs a month on it right now
4. Storage syndications - passive

jeremy said:

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Got to thinking about it the other day and realized, hardly anyone diversifies their retirement. I'm not talking about the 401k. Obviously its investments are diversified. I mean multiple income streams:

I'm thinking a great plan would be:

Get a healthy 401k so you have some interest bearing income when the economy is ticking.

One spouse works a job with a pension plan so you have a "known income".

Third, mailbox money in the form of some kind of residual income. That's the one I'm currently trying to find now.

I'm fortunate that I have a strong back and some construction knowledge. On top of that, I have some extra funds to pour into a construction project that I can hopefully diy a portion of.

Two thought provoking questions:
Does anyone think this way about retirement? Surely I'm not the first, I've just never heard anyone advise about multiple income streams for retirement.

Anyone have good ideas for a residual income project? Obvious ones are rental property, short term rentals, etc. What else is out there that I'm not seeing? Hopefully this thread gets several people on a good path.

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I'll be the slightly snarky one and say this board talks about this all the time. Most on here are proponents of it; the hard part is just figuring out how to get started doing it and/or making the time to just do it.

Having multiple income streams is ideal. My parents have lived totally off of passive RE income for the past decade. Have yet to touch their retirement nest egg and they just turned 80. They sold their three rental homes (all paid for) at the apex of the crazy market last year and basically are going to live off that cash until they even have to consider their investments. That cash will probably last a decade because they have no debt.

The question for my wife and I is do we actually want to do that. We are going to have at least one single-family home (if not two) that we could monetize here in the next few years. It will come down to how much time do I want to give to it and do I just let a company manage it for me and take a cut. Or just sell them and take the cash.

Also, I think having a spouse work a job with a pension is a rare find these days. Most companies aren't offering pensions anymore. The only people i know that get a pension are boomers who have been with same company for years and maybe a few lucky Gen X'ers here and there. I'm Gen X and don't know a single Gen X'er IRL who has one.

Here is an idea I learned from a friend of mine. I would never personally do this but she actually rents our her swimming pool/back yard. There is an app for that.

She covered her mortgage during COVID doing that. The liability exposure scares the piss out of me but the ROI for her was incredible.

Cow-calf operation, but you have to be very frugal. Also the cows do better in the shade of some oil wells.

No doubt. Told her it was stupid but she likes the money.

As YouBet indicated, you are unlikely to find any job with a pension, 401(k) plans have all but replaced them. Some older folks still have them, but it would be rare to find a company still offering them.

And diversying retirement is a great idea, as is diversifying income before retirement. My wife and I did that and we have both retired but have not touched a dime of our IRA monies. We will if we begin to travel out of the country again. We live off her teacher retirement and my social security plus the net rental income. Done properly, the rentals will be such that someone else is paying for you to own the property and there will be funds left over. Tire of it, and you can generally cash out at a lot more than you paid for it. Most rentals will not provide much, if any, of annual tax savings, but some will. Ours do to the extent that they offset all of our other streams of income to the point that our taxable income is at the point that the qualified dividends and long-term capital gains are tax-free (for a married couple, right around $110,000 before the standard deduction). Some years we take distributions from the IRA up to the point we do not push above the level of income where the dividends and capital gains are subject to tax. Some years we can't do that though.

You are thinking along the right lines and sounds like getting started doing so early in life. Best of luck to you in implementing your plans!

I was in the same boat with the OP about 10 years ago. I purchased 3 rent houses and started buying "dividend king" and "dividend aristocrat" stocks, both of which have 25 or 50 year track record of increasing their dividend payout on a yearly basis.

It has worked OK so far, but there are a couple pitfalls. On the rent houses, the cost of property taxes and maintenance didn't keep up with the ability to raise rents. These houses are all in the south side historic district in CS and with the significant overbuilding there + rapid tax increases it make the revenue less reliable. Add in the aggressive city council rules on max number of unrelated tenants and it further complicated that strategy. Also consider the potential personal liability for accidents on property. Be prepared to add an umbrella policy to your insurance. I have since sold 2 of those houses.

On the dividend stock strategy, in spite of the long track record of many of these stocks raising their dividend annually, I have had 3 cut their payouts over the last couple years. When they did, the stock went down significantly and thus I was stuck either accepting the lower % payout or having to sell the stock at a loss. While you can certainly take a chance on dividend kings that pay a very high dividend (such as Altria - stock symbol "MO") it is unlikely that 8% payout is sustainable. If you broadly diversify then yor are looking at something around 3-4% annual payouts.

Another option beyond the dividend kings are broker div stocks like JEPI and SCHD. These are very conservative dividend producers that don't fluctuate much in price. Great to load up on over time for a steady payout.

JEPI is not a vanilla dividend fund....

Quote:

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In addition, the fund's adviser enters equity-linked notes to provide the returns of the S&P 500 Index with covered call options written.

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What stocks did you buy?

I've been in 1 for 15+ yrs & the dividend has never dipped & continues to increase.

12thMan9 said:

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What stocks did you buy?

I've been in 1 for 15+ yrs & the dividend has never dipped & continues to increase.

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AT&T (T) and Mercury General (MCY) were both Dividend Kings/Aristocrats that I owned which cut their dividend by 50% a couple years ago. At the time I think AT&T had been on a 50+ year run of raising the dividend. I continue to own about 20 current dividend kings/aristocrats in my income portfolio, along with a couple odd balls like a midstream MLP (EPD).

Good ideas everyone.

I'm thinking of building a rental myself as I've already built a home and remodeled a second. But I ain't getting any younger and I'm not sure dealing with renters is going to be fun.

Anyone know about storage facilities or similar "rentals" that might have less risk than a house rental?



Edited because, "me fail English!? That's unpossible!"

jeremy said:

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Good ideas everyone.

I'm thinking of building a rental myself as I've already built a home and remodeled a second. But I ain't getting any younger and I'm not sure dealing with renters is going to me fun.

Anyone know about storage facilities or similar "rentals" that might have less risk than a house rental?

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Yeah, it's not. I have some absolute horror stories from my childhood watching my parent's deal with the fallout of bad renters. And me generally having to be clean up crew after someone decided to destroy the property or living like such trash that they let the place get absolutely infested with cockroaches.

Walked in one place to find "F* YOU, [MY MOM'S NAME] written in mustard along about a 20 foot wall. That was humorous. My brother's one and only attempt at RE resulted in his very first tenant proudly proclaim that he was not going to pay my brother rent and would squat until the courts forced him out...which he did. After 3 months of the guy not paying, my brother finally got the court order and it took a sheriff physically forcing the guy out.

But don't let me discourage you!

YouBet said:

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jeremy said:

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Good ideas everyone.

I'm thinking of building a rental myself as I've already built a home and remodeled a second. But I ain't getting any younger and I'm not sure dealing with renters is going to me fun.

Anyone know about storage facilities or similar "rentals" that might have less risk than a house rental?

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Yeah, it's not. I have some absolute horror stories from my childhood watching my parent's deal with the fallout of bad renters. And me generally having to be clean up crew after someone decided to destroy the property or living like such trash that they let the place get absolutely infested with cockroaches.

Walked in one place to find "F* YOU, [MY MOM'S NAME] written in mustard along about a 20 foot wall. That was humorous. My brother's one and only attempt at RE resulted in his very first tenant proudly proclaim that he was not going to pay my brother rent and would squat until the courts forced him out...which he did. After 3 months of the guy not paying, my brother finally got the court order and it took a sheriff physically forcing the guy out.

But don't let me discourage you!

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Good grief!

EPD is who I was referencing. Also in ET, another MLP w/ good growing dividend.

With REITs you don't have to worry about that. Tax advantages aren't as good, though

YouBet said:

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jeremy said:

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Good ideas everyone.

I'm thinking of building a rental myself as I've already built a home and remodeled a second. But I ain't getting any younger and I'm not sure dealing with renters is going to me fun.

Anyone know about storage facilities or similar "rentals" that might have less risk than a house rental?

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Yeah, it's not. I have some absolute horror stories from my childhood watching my parent's deal with the fallout of bad renters. And me generally having to be clean up crew after someone decided to destroy the property or living like such trash that they let the place get absolutely infested with cockroaches.

Walked in one place to find "F* YOU, [MY MOM'S NAME] written in mustard along about a 20 foot wall. That was humorous. My brother's one and only attempt at RE resulted in his very first tenant proudly proclaim that he was not going to pay my brother rent and would squat until the courts forced him out...which he did. After 3 months of the guy not paying, my brother finally got the court order and it took a sheriff physically forcing the guy out.

But don't let me discourage you!

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PaSsIvE InCoMe

To be fair, if you can power through the pain it pays off in the end. See my first post.

IEP 15% Dividend Quar.

Multiple income streams are fine.. but that shouldn't be the goal unless it accomplishes something other than another stream of income (wealth appreciation, tax efficiency, etc). Most long term real estate situations I've seen are not a good return on equity at all... But people focus on the check over time. They are good at with accumulation, but paid off real estate rarely calculates to a good return.. redeploy the capital when ROE is below your threshold.

The goal should be to maximize your return on equity and therefore income potential. If that comes from the stock market, so be it.

If you live in an area with high rent, high real estate appreciation, then real estate is good.

If interesting in a business accumulates wealth and income.. go there.

But I think "multiple income streams" by itself is an elementary goal that leads people down a loss than optimal path.. usually.

I'll also add.. the reason most people don't think about this is because most people are flat broke!

cjsag94 said:

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Multiple income streams are fine.. but that shouldn't be the goal unless it accomplishes something other than another stream of income (wealth appreciation, tax efficiency, etc). Most long term real estate situations I've seen are not a good return on equity at all... But people focus on the check over time. They are good at with accumulation, but paid off real estate rarely calculates to a good return.. redeploy the capital when ROE is below your threshold.

The goal should be to maximize your return on equity and therefore income potential. If that comes from the stock market, so be it.

If you live in an area with high rent, high real estate appreciation, then real estate is good.

If interesting in a business accumulates wealth and income.. go there.

But I think "multiple income streams" by itself is an elementary goal that leads people down a loss than optimal path.. usually.

I'll also add.. the reason most people don't think about this is because most people are flat broke!

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That's a smart way to look at things and I haven't really considered it that way. Diversification for the sake of diversification can be dumb. Why invest some at 3% return if you could guarantee 6%.

However, I'm looking to diversify to help hedge questionable stock markets and global economies. It may not pan out, but globally I feel we are in for some real hardship and I don't want to be left with a 401K as my only income stream.

actually every retirement planner discusses multiple income streams and diversification

stocks
bonds
gig economy part time jobs
401K
real estate passive income
social security

I brought up the concept of annuities last week.

obviously the best plan is to have some skill in your retirement where you can earn a bit of income each year to go along with your savings and social security. for me it will be a tour guide and writing books and part time tutoring of history

Agreed.. my point is that the "goal" shouldn't be to create multiple income streams, the goal should be to collectively mitigate risk, manage wealth, and manage income (which diversifyinh income generating assets CAN certainly do, but may not).

I know my comment may just sound argumentative, but as Jeremy said above, why get 3% when you can get 6%? I'm just pointing out that securing the income one needs is the goal, mitigating risks and managing wealth is also the goal... Getting income sent to me from 3 addresses (especially if it's lower income) doesn't matter unless you've gained something else.