Retirement Investing

Income Investing: Asset Classes That Can Be Used For Savings, Investment And Retirement

Income investing is part of a balanced portfolio and takes on greater significance as an individual moves closer to retirement age. When an individual retires, assets often get shifted into income producing vehicles to replace lost income from the cessation of employment. Taxation considerations, a persons overall investment approach and individual considerations shape investment decisions. What are some investment vehicles that can be used for investment income?

Term Deposit Accounts: Money held on deposit with a bank or credit society can provide regular and guaranteed investment income. These term deposits can be set to different time durations. Traditionally, term deposits usually only maintain pace with inflation and are not a favored approach for capital growth. They can, however, provide a regular stream of interest income.

Real Estate Investing: Initially, real estate investments are not usually cash flow positive but can mature to provide regular investment income. Property appreciation allows the investor to raise rents to the point where they provide regular monthly income above the servicing requirements of the loan. Real Estate investing has been used effectively by investors who build a long term, portfolio that is cash flow positive. You also have the option to sell property for a capital gain to product greater lump sum payout.

Stock Dividend Investing: Investing in high yielding stocks can pay a regular income stream and provide the opportunity for capital growth. High dividend paying stocks are typically stable and secure stocks that have reached maturity and have a regular historical track record for paying out dividends. Some new exchange traded funds have recently been established which comprise a basket of high dividend paying stocks. Investors can use these vehicles for income investment purposes.

Annuities: These are typically used by individuals who have exhausted their other investment options. These securities can be taken for a fixed term and can pay a regular and consistent income stream. They are perfect for retirees who want to contribute to a plan that pays a fixed amount of money over a certain time frame. There are different types if annuity products. Some have more flexibility than others. Vanguard is one company that provides annuity products for fixed income investing. These structures are generally considered to be safe income investing alternatives. 

The above represents the most common investment vehicles used for income investing. In practice, one or a combination of the above approaches can be used to provide regular and stable income. Individual financial position and investment preference can shape a persons investment decisions. A financial advisor can offer more tailored advice to suit your individual position.

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