Investment portfolios can be geared toward generating current income when needed. This is generally a balancing act tilted toward generating income, while also investing for growth and preserving capital. High paying dividend stocks can work up to a point, but a combination of illiquid alternative securities (REITs & BDCs), favorable closed-end mutual funds, select growth securities using ETFs and/or mutual funds are sometimes the best at supporting more current income and higher withdrawal rates. Of course it depends on the account type, but for taxable accounts, a sleeve of municipal bonds or municipal bond funds are also favored.

Fixed Immediate Annuity and Fixed Deferred Income Annuity contracts with an insurance company can generate current income. Fixed annuities earn a stated return rate set by the insurance company. Some will pay guaranteed monthly income for the rest of your life. In the exchange, the insurance company controls the funds and receives fees while the policyholder is provided with a specified guaranteed income for life.

Fixed Indexed Annuity (FIA) contracts with an insurance company can also generate current income. Some FIAs will also pay a minimum guaranteed monthly income over a lifetime. FIAs earn a return rate tied to an index that is related to a stock market index, like the S&P 500 or Dow 30. In regards to the index, FIAs are generally structured with protection to limit the downside in exchange for limits on the upside. The net returns of the FIA can be complicated by a combination of caps, participation rates and/or spreads that contribute to insurance company fees and reduce policy net returns. This combination of caps, participation rates and/or spreads can change over the life of the policy and further reduce policy net returns. Here too, the insurance company controls the funds and receives fees, while the policy holder gives up equity market upside returns in exchange for downside market protection.

Income generation is another key element of financial planning that we keep simple for our clients. It means that the deposit shows up each month, every month, to provide a ready source of funds for our clients to pay bills and meet expenses in retirement.

*Guarantees are subject to the claims-paying ability and principal strength of the annuity issued.



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When you take control of your finances, rather than letting them control you, you can live life more fully. Regardless of your age or life stage, you can make financial decisions that move you toward your goals.