For decades, most investors have been taught to focus on growing their portfolios. Accumulate. Grow. Maximize. That works — until it doesn’t. As you near or enter retirement, the strategy that once helped you build wealth may now put it at risk.
That’s why for most investors it makes sense, as retirement approaches, to make a shift in your mindset and your financial strategy from growth to income-first, growth second. In fact, for most investors over 50, this shift isn’t just wise, it is essential!
Here are seven vital facts about investing for income that you should know:
Fact 1: Traditional Growth-Focused Strategies Fall Short
Growth investing relies heavily on long-term capital appreciation. While that may work in your 30s and 40s, it becomes increasingly risky within ten years of retirement because:
- You no longer have decades before retirement to recover from a major loss.
- You’ll soon need your assets to start generating reliable income.
- Your retirement income stream may need to last for up to 30 years.
The main flaw with growth-focused portfolios is that they depend on selling shares to create retirement income, which becomes dangerous in down markets.
Fact 2: Income-First Investing is More Strategic
By contrast, an income-first strategy focuses on generating reliable income through interest and dividends without needing to sell shares. This shift means:
- More predictability in your cash flow.
- Less worry about market swings.
- Greater alignment with your retirement goals.
When structured properly, income-first investing allows you to maintain your lifestyle without the stress of liquidating assets during market lows.
Fact 3: Income-First Investing Offers Many Options
Shifting to an income-first, growth-second strategy gives investors a wide range of investment vehicles to choose from depending on their individual needs, goals, and risk tolerance. The list includes:
- Dividend-paying stocks
- Corporate and municipal bonds
- Real Estate Investment Trusts (REITs)
- Preferred stocks
- Certain types of annuities
- Exchange Traded Funds
While choosing the right options for your situation with the help of an Income Specialist is important, it is equally important to have a qualified specialist actively manage your portfolio in accordance with market changes.
Fact 4: The Benefits of Income-First Are Many
Switching to an income-first approach can offer numerous advantages, including:
- Sustainability: Your income is generated from interest, dividends, and distributions, not by depleting your principal.
- Risk Reduction: You are better protected against a sudden loss due to a market correction and against cannibalizing your principal by selling shares for income during a down market.
- Peace of Mind: You have more confidence in knowing your income needs are met and your goals are achievable.
- Tax Efficiency: By design, an income strategy strives to minimize your retirement taxes and take advantage of tax law opportunities.
- Legacy Potential: By preserving more principal, you’ll be better prepared to leave a legacy for your heirs.
- Organic Portfolio Growth: Designed to reduce risk and increase your income potential by growing your assets through strategic reinvestment rather than relying on capital appreciation.
Fact 5: An Income Strategy Can Provide a Better Quality of Life
The emotional relief that comes with knowing your long-term income strategy is reliable can’t be overstated. Unlike growth investing, where market drops may force painful decisions, income investing helps you:
- Sleep better at night.
- Stay calm through market volatility.
- Avoid panic selling or impulsive changes.
- Spend without guilt or worry.
- Really enjoy the retirement you’ve earned.
Fact 6: Time is of the Essence for Investors Over 50
The earlier you make the shift from growth to an income-first, growth-second approach after age 50, the better. There are two primary reasons:
- The markets are unpredictable: The next downturn could come at any time, and if you get caught in it, you may need to wait years until your portfolio recovers, potentially even forcing you to delay retirement.
- Making the shift before retirement can lead to better outcomes and more options: Creating a strategy to generate passive income from your investments while you’re still working allows you to start growing your portfolio “organically” right away, leading to more future growth and income potential.
Although it’s never really “too late” to make the shift once you’ve retired, making it as early as possible is the best approach.
Fact 7: Finding the Right Advisor is Key
Not all advisors are income specialists. In fact, most continue to focus on growth-based financial strategies geared toward younger investors still in the accumulation stage of financial planning. That’s why it’s important to look for an advisor who:
- is branded as a specialist in retirement income.
- focuses on risk mitigation, not just returns.
- prioritizes financial literacy and client education.
- can customize a plan to your specific needs.
- is a fiduciary.
An advisor who understands the income-first, growth-second mindset and also specializes in the approach is essential to building and maintaining your retirement income strategy!
Summary
Once you’re within ten or so years of retirement, investing is no longer about beating the market or saving for the future; it’s about meeting your needs. Shifting to an income-first strategy:
- ensures you have a strategy aligned with your goals and right for your stage of life.
- reduces stress and improves financial security.
- provides confidence and peace of mind for the years ahead.
Don’t wait until a downturn forces your hand. Make the shift today — intentionally, intelligently, and with the support of the right advisor!