5 Ways To Generate Alternative Retirement Income

Closeup front view of a senior couple having some drinks with a younger couple they met on a sailing cruise.
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Traditional routes of generating money during retirement (as commonly suggested by financial experts) include taking advantage of your 401(k) and receiving — and maximizing — your Social Security payments. While these are both efficient and common methods of generating income, an increasing body of evidence is indicating, for many Americans, that more funds will be necessary.

With 2022’s COLA increase coming up 50% behind inflation, if there was ever a time to add additional sources of income to your household when planning ahead for the later stages of life, it’s now. Below are five ways you can bring your retirement income up beyond the most traditional considerations.

Life Insurance

It might not be the first place our mind goes when thinking about retirement, but certain life insurance plans can offer you both a death benefit for your loved ones as well as income from an interest-bearing account.

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Typically called variable universal life (VUL) insurance, these policies take the money you put into them and invest it into the market — all while keeping your death benefit safe and guaranteed to your beneficiaries. It is important to note that the money needs to be vested before you can touch it, which can take up to 7 years depending on the plan and company. The best part, however, is that contributions are post-tax, grow tax-deferred and are distributed tax-free — meaning the amount you see in your account is the money that will hit the bank. VUL insurance policies are a great way to toggle your distributions, and tax hit, from other taxable accounts like a 401(k). There is no income limit or contribution limit.

Traditional and Roth IRAs

Individual retirement accounts (IRAs) are like 401(k)s, but without the necessitated involvement of a employer and with a lower limit.  Traditional IRAs are pre-tax, grow tax-deferred and are taxed when you take the money out. They operate much in the same way as a 401(k), but you have full control over the investment.

The contribution limit is $6,000, and if you also contribute to a 401(k) you are prohibited from claiming a tax deduction for a 2022 traditional IRA contribution should you earn more than $78,000 filing single and $129,000 filing jointly. This is because a 401(k) allows for the same tax benefits.

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Roth IRAs are individual retirement accounts that are contributed to with post-tax dollars, grow tax deferred and — here’s the best part — give distributions completely tax free. Income limits for 2022 contributions are $129,000 filing single and $204,000 filing jointly, and the maximum you can contribute for 2022 is $6,000. Roth IRAs are a great way to toggle 401(k)s and Social Security distributions, as they are taxed differently.

Dividend Stocks

Dividend stocks are stocks that you invest in, and which pay a portion of profits back to you through dividends. These are typically established companies with large market share, like Exxon Mobil and Chevron. Dividends have made up about 40% of overall stock market returns since 1930, per Fidelity, and are a reliable way to add extra monthly income without selling the underlying asset. In terms of retirement, dividend revenue can be a smart way to supplement other retirement income each month — plus, you still hold the stock if you ever need to sell for emergency funds.


Real Estate Investment Trusts (REITs) are one way seniors can hedge against inflation and supplement their income. REITs are companies that own or operate properties like office buildings, warehouses, malls and large apartment buildings.

It should be mentioned that REITs are often considered on the riskier side of potential investments — unlike, say, government bonds or Treasury notes. REITs tend to do well in times of increased inflationary pressures because landlords can raise rent when prices rise, which can offer better returns for investors. The average dividend yield on REITs is around 3%, CNBC reports. Compared to the usual 1.5% to 2% yield on the 10-Year Treasury note, REITs are an option if you can stomach a little more risk.

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Annuities provide monthly lifetime income for retirees until the time of their death, essentially acting as retirement accounts that are structured to pay out each month. As far as retirement goes, they are ideal to supplement a 401(k) or Social Security benefits. You can contribute to an annuity over several series of contributions or as a lump-sum payment, and then watch the investment grow. There is no contribution limit for an annuity, so you can deposit as much as you want. The fee structure of annuities are more expensive as compared to some other accounts, which is something to consider before making the investment.

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About the Author

Georgina Tzanetos is a former financial advisor who studied post-industrial capitalist structures at New York University. She has eight years of experience with concentrations in asset management, portfolio management, private client banking, and investment research. Georgina has written for Investopedia and WallStreetMojo. 
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