What will life be like in the days, months, and years after you retire? A lot of that depends on the income that you have after you stop working. That’s right, there’s more than one income stream that all near and far future retirees should cultivate, starting now.  

While the COVID-19 ravaged economy seems like a scary time to be preparing for retirement, it remains important to assess and reassess your strategy and goals. 

Here are the income streams that all soon-to-be retirees should consider. 


Dividends are a form of profit sharing. In other words, when a company earns a profit, it uses a portion of that to pay dividends to its shareholders. Dividends can offer a steady stream of income but are often overlooked. If you opt to reinvest dividends while saving for retirement, purchasing additional shares of the dividend-paying stocks, you will grow your portfolio. Upon retirement, you can opt to take the dividends as income (mailed as a check or direct deposited) instead of reinvesting them. 

There are a few things to look for if seeking dividend paying stocks in retirement. These include stocks with high dividend yield or high dividend growth, as well as a strong balance sheet. 


An annuity is “an insurance product that offers guaranteed income.” If that isn’t ideal for retirement, what is?

Annuities remove some investment risk from the retiree, shifting it instead to the insurance company. After the dotted lines are signed and the money is officially transferred to the provider of the annuity, the retiree is guaranteed fixed payments regardless of how the stock market performs.

However, annuities are not without costs. There are a number of fees associated with different types of annuities. “In total, average fees on a variable annuity are 2.3 percent of the contract value and can be more than 3 percent,” according to annuity.org.  Those might include commissions, which are paid to the selling agent on a one-time or even annual basis. 

And, when it comes to purchasing an annuity, don’t plan to take out your money early. Surrender fees, which are paid if you withdraw money beyond your scheduled monthly payments, can be as much as 7 percent of the total value of the annuity. 

Also, keep in mind that there are many types of annuities, including fixed annuities, variable annuities, fixed-indexed annuities, immediate annuities, and deferred annuities. So, be sure to do your research before selecting what’s right for you. 

Social Security

Social Security is another steady stream of income, but how big that stream is depends on when you take it. While you can retire as early as 62 years old, even if you continue to work, you’ll miss out on a lot of cash if you do. First, by taking it early, your total will be permanently reduced by about 30%. And, by earning too much, you can reduce your benefits. Waiting to 66, 67, or even 70, can greatly increase your benefit. 

Pension plan

A pension is an employer-provided retirement account that provides a fixed payout upon retirement.  A huge employer perk, the sum of a pension is typically determined by length of employment and salary while working. Pensions can be paid monthly or in a lump sum. 

Planning for income in retirement 

Trying to piece together an income after your paychecks stop can make retirement feel overwhelming whether you are planning for it this year or in the far-off future. However, you can follow these simple steps to regroup on your goals. 

  • Envision yourself in retirement. Do you want a low-stress job to keep you busy or not? Do you imagine traveling, or spending time with family close to home? Not everyone has the same retirement plans, and not everyone’s goal is simply to amass as much wealth as possible. 
  • Diversify based on your timeline. What will you need now, soon, and later? Be realistic about when you can and should retire, carefully considering social security eligibility and tax obligations. 
  • Don’t get too creative. Cash, CDs, and money market funds are the safest place to save cash if you are planning for retirement in the short-term. But remember, while you can’t snap together a pension you don’t have, you can make careful investment decisions now that will give you more fixed income later.   
  • Sum all of the elements in your retirement game plan. Remember, social security, pensions, and fixed income annuities are all sources of income. 

When it comes to retirement, there are tax perks and drawbacks. Traditional 401(k) are fully taxable as ordinary income. Annuity and pension income are fully or partially taxed as ordinary income, depending on whether contributions were tax-deferred. Consult with a tax professional so that you have a sense for what you might pay in taxes upon retirement.