How to generate retirement income - during retirement

Like most people, you probably save and invest throughout your working years so you'll be able to afford a comfortable retirement. Once you retire, you'll want to focus on strategies to help you make the most of your retirement income - and you might want to become familiar with these ideas well before you retire.

Basically, you'll have some "must do" moves and some "think about doing" moves. Let's take a look at the "must do" ones first:

• Take the right amount of distributions from retirement plans. Once you turn 59, you may be able to take penalty-free withdrawals, or distributions, from some of your retirement accounts, such as your traditional IRA and 401(k). But once you turn 70, you generally must start taking distributions from these accounts. Your required minimum distribution, or RMD, is based on the previous year's balance in your retirement plan and life expectancy tables. You can take more than the minimum, but you'll want to make sure you don't take so much that you outlive your savings.

• Maximize your Social Security benefits. You can start collecting Social Security as early as 62, but if you wait until your "full" retirement age, which will probably be around 66, your monthly checks will be larger. And if you wait until after your full retirement age before you start collecting benefits, your checks can be even larger, though they'll "top off" when you turn 70. What should you do? Start taking the money as early as possible or delay payments, waiting for bigger paydays? There's no one right answer for everyone. To get the maximum benefits from Social Security, you'll need to factor in your health status, family history of longevity and other sources of retirement income.

Now let's consider two moves that you may think about doing during your retirement years:

• Purchase income-producing investments. Outside your IRA and 401(k), you may have other investment accounts, and inside these accounts, you'll need a portfolio that can produce income for your retirement years. You may choose to own some investment-grade bonds and certificates of deposit (CDs), both of which can help provide you with regular interest payments at relatively low risk to your principal. However, these investments may not help you stay ahead of inflation, which, over a long retirement, can seriously erode your purchasing power. Consequently, you also may want to consider dividend-producing stocks. Some of these stocks have paid, and even increased, their dividends for many years in a row, giving you a chance to obtain rising income. (Keep in mind, though, that stocks may lower or discontinue dividends at any time, and an investment in stocks will fluctuate with changes in market conditions and may be worth more or less than the original investment when sold.)

• Go back to work. In your retirement years, you may decide to work part time, do some consulting or even open your own business. Of course, the more earned income you take in, the less money you'll probably need to withdraw from your investments and retirement accounts. However, if you've started collecting Social Security, any earned income you receive before your "full" retirement age will likely cause you to lose some of your benefits. Once you reach full retirement age, you can keep all your benefits, no matter how much you earn.

Keep these strategies in mind as you near retirement. They may well come in handy.

Rod Clugston AAMS is a Financial Advisor at Edward Jones, 1110 W Park Place Ste 224, Coeur d'Alene, ID (208)664-9294. Rod also teaches investment classes at NIC, for more info about these classes, please call 769-3333.