Retirement isn’t just about how much you’ve saved; it’s about how smartly that money works for you once the paychecks stop. Relying on a single income source can feel a little like putting all your eggs in one very fragile basket.
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According to Gallup, about 6 in 10 Americans report that they have money invested in a retirement savings plan. GOBankingRates spoke to Josh Katz, CPA, founder of Universal Tax Professionals, for his top recommendations for building a retirement income mix that’s steady, flexible and built to last.
Why One Income Stream Isn’t Enough in Retirement
Relying solely on Social Security or a pension is akin to building a house on a single pillar, per Katz. “If it shakes, the whole structure is at risk,” he said. He explained that longevity risk, inflation and unexpected market downturns can catastrophically erode a single source.
“The core philosophy I instill in my clients is to build an income floor and only then layer on growth,” he said. He explained that your guaranteed sources (Social Security, pensions, annuities) form an unshakable foundation that covers non-negotiable living expenses.
Everything above that, such as investments, rental income and part-time work, provides the flexibility for lifestyle and growth and acts as a buffer against volatility.
This layered strategy turns retirement from a period of scarcity into one of security and possibility.
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The Income Streams That Add Flexibility and Growth
Katz shared how rental properties, dividends and side gigs can supplement retirement income. According to him, these are the powerful tools in the “flexibility and growth” layer of your income plan.
“A well-managed rental property can provide inflation-resistant cash flow and long-term appreciation,” he said.
Additionally, a portfolio focused on dividends from stable companies offers a passive income stream that can grow over time.
And a side gig or consulting work, what Katz calls “active supplemental income,” does more than bring in money. “It keeps you engaged, spreads out withdrawals from your nest egg in the critical early retirement years, and can often be scaled up or down as needed,” he said.
For retirees, this active income can be the key to preserving capital during a market downturn.
How To Adapt Spending When Markets Shift
Rigidly withdrawing a fixed percentage annually, like 4%, regardless of market performance, according to Katz, is a recipe for depleting capital in a downturn. Instead, he advised implementing a dynamic withdrawal strategy.
“In strong market years, you might take a modest cost-of-living increase,” he said. In down or flat years, you could tighten discretionary spending and rely more heavily on your cash reserve and bond ladder, allowing your equity investments time to recover.
Katz added that this flexibility, where your lifestyle has some adjustability, is far more sustainable and reduces the “sequence of returns risk” that threatens new retirees.
Editor’s note: This article is for informational purposes only and does not constitute financial advice. Investing involves risk, including the possible loss of principal. Always consider your individual circumstances and consult with a qualified financial advisor before making investment decisions.
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This article originally appeared on GOBankingRates.com: I’m a CPA: My Top 3 Recommendations To Retirees for Diversifying Income
