There're lots of good reasons for income investing. Let's go straight to Number One.
The way most people save for retirement is to buy stocks, certificates of deposit and bonds, accumulating them while they're still working. Once they retire and stop working, they stop buying financial securities. Their plan is to live off their Social Security and any pension.
Many retirees don't want to touch the assets they've accumulated. They will take the stock dividends, bond interest and interest paid by CDs. Most are reluctant to sell off any assets, however.
After all, they're no longer working, so they don't see a way to build up any additional money. What they have is what they have. Barring an inheritance, returning to work (which they may be unable to do even if willing) or winning the lottery, they're not going to receive any more.
Many Retirees Just Want to Have Fun
First of all, many newly retired people want to take time to have fun doing things they didn't have time while on the job. Cruises are popular. Some just want to buy an RV and drive around the country. Others visit exotic places. It's finally time for them to swim on a beach in Tahiti, look at the pyramids of Egypt or go on an African safari.
And if they don't travel for themselves, they're driving long distances or buying airplane tickets to go see their grandchildren. They're children live where they must to make a living, and can't take enough time off from work to visit Nana and Papa, so the grandparents make the trip.
Many decide to flee the snow and cold weather of New England and the Midwest. They seek out condos in Florida and Arizona.
Retirees Hate to Sell Off Assets, but May Not Have a Choice
Many others are more conservative. They're happy to visit the local golf course every day, enjoy lunch out with friends and rent a movie in the evening.
However, life doesn't always go as planned, at least not forever. Unexpected medical bills, especially having to go to a nursing home, can destroy perceived financial security.
Experts Disagree on How Many Assets Retirees Can Safely Sell Off
Finance experts have run complicated simulations of retiree portfolios. They feed in all possible scenarios, given the incredibly wide range of volatility the stock market has displayed. Depending on what happens to the S&P 500 Index and interest rates in the years following your retirement, your assets can vary enormously -- from vast wealth to almost broke.
Unfortunately, you can't know when you stop working what the markets will do. The stock market goes up in the long run, but the long run can be twenty to thirty years.
Many financial planners now tell retirees they can safely sell of 4% of their assets annually. Some are more conservative and advise no more than 2% or 3%.
If All Your Assets are Producing Income to Pay Your Expenses, There's No Reason to Sell Any of Them
These computerized simulations all assume the retirees own assets that don't pay their way. When you own a stock that doesn't pay dividends, that stock is doing nothing for you. If it's going up in market price, selling it is a valid temptation.
However, if your assets are paying you income with which to live on, you are not vulnerable to market price volatility.
Have a bill to pay? Okay, here's a stock dividend check. Cash it and pay the bills.
If you bought only growth stocks while you were working, you must sell some shares to receive any benefit. And then they're gone.
That's why I believe income investing is the smartest way to go for people saving for retirement, and for retirees.
Author Resource:
You want your money to last through your retirement. Click here to get the information you need to effectively make money from your investments whether the markets go up or down. If you're ready to discover how income investing can help you retire with financial security, visit this page, enter your email address into the form and click on the Submit Button. Then go to your inbox and verify that. It's free for the taking. http://www.incomeinvesthome.com/.
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