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- When it comes to retirement planning, boilerplate advice is everywhere.
- Different routes can lead to a secure retirement using under-the-radar portfolio strategies.
- “The retiree can use that income to supplement other forms of income in their portfolio,” said Rob Williams, managing director of financial planning at Charles Schwab.
Craft innovative retirement strategies beyond traditional stocks and bonds to secure a financially stable future.
Smart Retirement Planning Alternatives
Sure, stocks outrun inflation, but what about using stock options to generate income? Bonds provide ballast and income, but what about buying a fixed-income annuity to create a guaranteed income stream for life? Plowing savings into a tax-advantaged 401(k) or IRA is a no-brainer, but what about putting some retirement dollars in a taxable brokerage account? Dialing back stocks near or in retirement may lower volatility risks, but what about the growth benefits of holding more rather than less equities in your 60s, 70s, and 80s? Taking distributions from your 401(k) to pay bills is doable. But what about creating your own pension that provides a paycheck for life? Consider new target-date funds that come with built-in annuities.
Retirement Planning Strategies For Your Needs
There’s no one-size-fits-all approach to a secure retirement. Not outliving your money isn’t just about the accumulation phase of retirement investing. It’s about finding ways to solve money challenges during the “decumulation” phase. It’s about figuring out how to turn the lump sum in your 401(k) into a steady paycheck. At the same time, you can grow some of your retirement savings so you don’t run out of money.
Investing For Retirement: Stocks Vs. Options
Options aren’t usually at the top of the list when investors think about retirement planning strategies. Most 401(k) plans don’t allow options trading. But the savvy use of options in an IRA (or taxable brokerage account) is a conservative way of generating income. Not that your retirement savings should go to using options to speculate, as you don’t want to gamble with your nest egg. But, rather, you could consider using a low-risk covered call strategy as part of your retirement investing plan. This common options trade is a way to collect rent, or income, on the premium you earn selling an option while also capturing upside on the stock.
Good Option For Active Retirement Planning
“The retiree can use that income to supplement other forms of income in their portfolio,” said Rob Williams, managing director of financial planning at Charles Schwab. You’ll also profit from any price appreciation up to the $170 stock price. The downside? You could miss out on the upside if Apple rallies above the $170 strike price by the expiration of the option. Why? You’ll be forced to sell your 100 shares at $170 to the trader you sold the call to. So, if Apple shoots up to $180, you’ll miss out on the $10 per share in appreciation, or $1,000.
Conclusion
Exploring alternative retirement planning strategies such as using options for income, considering annuities for guaranteed income, and maintaining a diversified portfolio can significantly enhance financial security in your golden years.
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