Six Income Sources You Can Combine to Fund Your Retirement

Summary: Discover six proven strategies that can provide you with a steady stream of income during retirement. Learn how you can grow wealth with income sources like Social Security, investments, and annuities.

Planning for retirement can feel overwhelming, especially when you consider that your life savings need to fund potentially decades of expenses. If you haven’t planned how you are going to fund your retirement or are concerned that you have only a single income source, it’s not too late to change course and find additional sources of income.

Multiple income streams can provide the best chance of a secure retirement. It is also a way to help protect yourself from market volatility, inflation, and unexpected expenses. Here are six effective ways to earn income in retirement, all with distinct advantages that you can combine to create a complete retirement income strategy.

1. Social Security: A foundational income stream

Social Security benefits form the backbone of many retirement income strategies.¹ While these benefits alone may not cover all your expenses, they provide a reliable, inflation-adjusted income that lasts for life.

You can maximize your monthly payments by timing when you claim your Social Security benefits. If you opt to receive benefits at age 62, you’ll receive a reduced amount. However, waiting until your full retirement age (typically 66 or 67, depending on your birth year) ensures you receive your full benefit amount. Delaying benefits until age 70 can increase your monthly payments by up to 32%.

Consider these factors when deciding when to claim:

• Current health and family longevity history
• Immediate financial needs
• Other sources of retirement income
• Spouse’s earnings and claiming strategy

What to expect from Social Security

According to the Social Security Administration, the average retirement benefit replaces approximately 40% of pre-retirement income.² The maximum benefit amount you receive depends on the age you retire.

2. Investment income: Building long-term wealth

Creating a diversified investment portfolio is one of the most effective retirement income strategies. To help ensure your money lasts through retirement, your investment strategy should balance your risk tolerance with the potential for growth. A diversified approach will also help you protect your savings and investments from market volatility.

Dividend-paying investments

Dividend-producing stocks, mutual funds, and exchange-traded funds (ETFs) can provide regular income while potentially growing your principal over time. Many established companies pay quarterly dividends, creating a steady income stream. Consider focusing on companies with a history of consistently paying and increasing dividends.

Bond investments for stability

Bonds generally offer more predictable income compared to stocks. When you purchase a bond, you’re essentially lending money to a corporation or government entity for regular interest payments. Here are some types of bonds to consider:

• Treasury bonds (backed by the U.S. government)
• Corporate bonds (higher yields but more risk)
• Municipal bonds (potential tax advantages)
• International bonds (currency diversification)

Creating a balanced portfolio

A well-constructed retirement portfolio typically includes both growth and income investments. The exact allocation depends on your risk tolerance, time horizon, and income needs. Many financial professionals suggest gradually increasing the proportion of your portfolio toward more conservative investments as you age, while still maintaining a meaningful share of assets with growth potential to combat inflation.

3. Annuities: Guaranteed income for life

Annuities can be an excellent addition to your retirement income strategies, particularly if you’re concerned about outliving your money. There are several basic types of annuities, including income annuities and deferred annuities. Depending on their type, annuities can fulfill your retirement needs in various ways, ensuring a guaranteed income either for the rest of your life or for a defined period. Here are other key characteristics of annuities:

• Fixed annuities: Provide predictable, guaranteed payments based on a fixed interest rate. These offer security but may not keep pace with inflation.
• Variable annuities: Allow you to invest in various sub-accounts, similar to mutual funds. Your income varies based on investment performance, offering growth potential but with added risk.
• Immediate annuities: You make a lump-sum deposit and immediately begin receiving income payments based on a fixed interest rate, similar to a fixed annuity. This can be ideal if you need income right away.
• Deferred annuities: You contribute money over time, and the annuity grows tax-deferred until you take payments later.

There are several annuity options designed to meet different retirement income needs and help provide the peace of mind that comes with a guaranteed lifetime income. Keep in mind, annuity guarantees are backed by the claims-paying ability of the issuer.

4. Real estate: Income-producing tangible assets

Real estate can be a powerful income generator in retirement, offering both rental income and potential appreciation. However, success requires careful planning and ongoing management.

Rental property income

Owning rental properties can provide monthly income, but consider these factors:

• Property management responsibilities
• Maintenance and repair costs
• Vacancy periods and tenant turnover
• Local rental market conditions
• Property taxes and insurance costs

Real estate investment trusts (REITs)

If you want real estate exposure without direct property ownership, REITs are a great alternative. These trusts own and operate income-producing real estate, and they typically pay dividends to shareholders. REITs can provide real estate diversification with greater liquidity than direct property ownership. Keep in mind, investing in Real Estate Investment Trusts (REITs) involves risks including, but not limited to: Interest Rate Sensitivity, Liquidity Issues, High Fees, Market Volatility, and Limited Diversification.

Home equity strategies

Your primary residence can also be part of your retirement income strategy. Options include:

• Downsizing to a smaller home and investing the difference
• Reverse mortgages for homeowners 62 and older
• Home equity lines of credit (HELOC) for flexible access to funds

5. Cash value life insurance: Tax-advantaged income

Life insurance provides a death benefit, but certain types also allow you to build retirement income. Cash value life insurance policies, for instance, can provide tax-deferred funds you can access during retirement.

How cash value life insurance works

Permanent life insurance policies, such as whole life or indexed universal life insurance, build cash value over time. You can access the cash value through loans or withdrawals, potentially providing tax-free income in retirement. Here’s a summary of the benefits of using cash value life insurance:

• Cash value grows on a tax-deferred basis
• Loans typically aren’t taxable income
• Flexibility in accessing funds
• Dividends are offered by certain policies and can enhance the cash value.

With cash value, it’s important to consider these additional factors:

• Premiums are typically higher with cash value than term life insurance
• Failure to repay loans against the cash value or any withdrawals reduces the death benefit.
• Policy performance depends on the insurer’s financial strength.

6. Bank accounts and CDs: Your safety net

While bank accounts and certificates of deposit (CDs) typically offer lower returns than other investments, they play a crucial role in retirement income strategies by providing stability and capital preservation.

Emergency fund importance

Maintain an emergency fund covering 12-18 months of living expenses. This fund prevents you from having to withdraw from other retirement accounts during market downturns or unexpected expenses.

Laddering CDs

CD laddering involves purchasing multiple CDs with different maturity dates. As each CD matures, you can reinvest the funds or use them for income. This strategy provides regular access to funds while potentially earning higher interest rates than savings accounts.

High-yield savings accounts

High-yield savings accounts offer better interest rates than traditional savings accounts while maintaining FDIC protection. These accounts can be ideal for short-term needs and emergency funds.

Creating your personalized retirement income strategy

The best retirement income strategies combine multiple income sources tailored to your specific needs, risk tolerance, and financial goals. Consider these steps when developing your plan:

Assess your income needs: Calculate your expected monthly expenses in retirement, including:

• Housing costs (mortgage, rent, taxes, insurance)
• Healthcare expenses
• Daily living expenses
• Travel and recreation
• Unexpected costs

Evaluate your risk tolerance: Your comfort level with investment risk affects which retirement income strategies make sense for you. Having a mix of guaranteed income sources (e.g., Social Security, annuities, bonds, CDs, HYSAs) and growth-oriented investments (e.g., stocks, real estate) provides both security and growth potential.

Consider tax implications: Different income sources have varying tax treatments. Traditional retirement accounts, Social Security benefits, and investment income are taxed differently. A tax-efficient withdrawal strategy can help maximize your after-tax income.

Plan for healthcare costs: Healthcare expenses often increase with age. Consider supplemental insurance options and factor these costs into your retirement income planning. Medicare supplement insurance can help cover gaps in Medicare coverage and long-term care coverage.

Work with financial professionals

Developing effective retirement income strategies can be complex, involving tax considerations, investment management, and insurance planning. A qualified financial professional can help you:

• Create a comprehensive retirement income plan
• Optimize your Social Security claiming strategy
• Select appropriate investment allocations
• Choose suitable insurance products
• Regularly review and adjust your strategy.

At Mutual of Omaha, our financial professionals can help you develop and implement retirement income strategies tailored to your specific goals and circumstances.

Frequently Asked Questions

When should I plan my retirement income strategy?

The best time to plan for retirement is now. The earlier you plan, the better. Ideally, begin thinking about retirement income strategies in your 40s or 50s. This gives you time to build multiple income sources and make adjustments as needed. However, it’s never too late to improve your retirement income plan.

How much income will I need in retirement?

Retirement planners generally recommend that you have enough savings at the end of your working life to replace 70% to 85% of preretirement income. Many recommend saving around 15% of your pre-tax income for retirement. However, your specific needs may vary based on your lifestyle, healthcare costs, and other factors. Consider creating a detailed budget that accounts for all your expected retirement expenses. Also keep this in mind: if you have ample savings, saving 15% of your income may be unnecessary. However, if your savings are low, you might need to save more to get on track.

Should I work with a financial advisor for retirement planning?

Working with a qualified financial advisor can be beneficial, especially for complex retirement income strategies. They can help you create a comprehensive plan, optimize your investment allocation, and navigate tax considerations. Choose an advisor who understands your goals and has experience with retirement planning.

 

Sources:

1. Social Security Administration: Securing your today and tomorrow
2. Social Security Administration, Retirement Ready: Fact Sheet for Workers Aged 18-48, April 2025

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Professionally Reviewed by Nate Hobson, Financial Advisor and Mutual of Omaha National Sales Director

Nate Hobson leads a team of Financial Advisors as Mutual of Omaha’s National Sales Director, Advisor Network. He is passionate about helping individuals and families make confident financial decisions that can help lead to lasting peace of mind.

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Disclosures:

Registered Representatives offer securities through Mutual of Omaha Investor Services, Inc., Member FINRA/SIPC. Investment Advisor Representatives offer advisory services through Mutual of Omaha Investor Services, Inc.  Mutual of Omaha Advisors is a division of Mutual of Omaha Insurance Company.

All investing involves risk, including the possible loss of principal, and there can be no assurance that any investment strategy will be successful.  Real estate investing can be subject to a number of risks including but not limited to general market risk, liquidity risk, credit risk, structural risk, and leverage risks. The strategies mentioned may not be suitable for everyone.

Mutual of Omaha and its representatives do not provide tax and/or legal advice, and the information provided herein is general in nature and should not be considered tax and/or legal advice.

Not all Mutual of Omaha agents are registered representatives or financial advisors.

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