What You Should Know When Converting Liquid and NonLiquid Assets into Income

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<!– {“name”:”Weekly Investment Blog”,”type”:”layout”,”children”:[{“type”:”section”,”props”:{“style”:”default”,”width”:”default”,”vertical_align”:”middle”,”title_position”:”top-left”,”title_rotation”:”left”,”title_breakpoint”:”xl”,”image_position”:”center-center”,”image”:””,”padding_remove_horizontal”:false,”height”:”full”,”image_width”:”1560″,”padding_remove_bottom”:false},”children”:[{“type”:”row”,”children”:[{“type”:”column”,”props”:{“image_position”:”center-center”,”media_overlay_gradient”:””},”children”:[{“type”:”image”,”props”:{“margin”:”default”,”image_svg_color”:”emphasis”,”image”:”wp-content\/uploads\/sites\/20\/2022\/03\/OneAscent-Blog-Cover-1560-x-686-px-14.png”,”image_alt”:”woman navigating money management”}}]}]}]},{“name”:”Blog Content”,”type”:”section”,”props”:{“style”:”default”,”width”:”default”,”vertical_align”:”middle”,”title_position”:”top-left”,”title_rotation”:”left”,”title_breakpoint”:”xl”,”image_position”:”center-center”,”padding”:”large”,”padding_remove_bottom”:false,”animation_delay”:false,”padding_remove_top”:true},”children”:[{“name”:””,”type”:”row”,”props”:{“layout”:”1-3,2-3″,”vertical_align”:false},”children”:[{“name”:””,”type”:”column”,”props”:{“image_position”:”center-center”,”media_overlay_gradient”:””,”width_small”:”1-3″},”children”:[{“type”:”image”,”props”:{“margin”:”default”,”image_svg_color”:”emphasis”,”image”:”wp-content\/uploads\/2020\/06\/Trans_Blue-Crown.png”}},{“name”:””,”type”:”headline”,”props”:{“title_element”:”h2″,”title_decoration”:”bullet”,”title_style”:”h3″},”source”:{“query”:{“name”:”posts.singlePost”},”props”:{“content”:{“filters”:{“search”:””,”date”:””},”name”:”date”}}}},{“name”:””,”type”:”headline”,”props”:{“title_element”:”h2″,”title_decoration”:”bullet”,”title_style”:”h3″},”source”:{“query”:{“name”:”posts.singlePost”},”props”:{“content”:{“filters”:{“search”:””},”name”:”author.name”}}}},{“type”:”list”,”props”:{“show_image”:false,”show_link”:true,”image_svg_color”:”emphasis”,”image_align”:”left”,”image_vertical_align”:true,”list_size”:””,”list_element”:”ul”,”column_breakpoint”:”m”},”children”:[{“type”:”list_item”,”props”:{“content”:”

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Should you be putting your money to work? After giving so much time and energy to your nine to five over the years, you may feel like it\u2019s time to take a break. But that doesn\u2019t mean your savings, investments, and other assets can\u2019t be bringing home a paycheck.\n

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Converting your liquid and nonliquid assets into income is a great way to find financial freedom in retirement. How does it work, and what do you need to know before getting started?\n

Liquid Assets vs. NonLiquid Assets\n

Liquid assets are known for easy conversion to cash without losing market value. Some of the most common liquid assets include:\n

\n
• Mutual funds\n
  
• Money market accounts\n
  
• Stocks\n
  
• Certificates of deposit\n
  
• Treasury bills, notes, and bonds\n
  
• Retirement investment accounts (401(k)s, Traditional IRA, Roth IRA)\n\n\n

  Nonliquid assets can be more difficult to convert and pose a risk of significant loss in value. Real estate is one of the most popular nonliquid assets but can also be art, jewelry, and certain collectibles.\u00a0\n

  What to Consider When Deciding on an Income Strategy\n

  After determining what assets you have to convert into income, there are a few more questions to consider before getting started.\u00a0\n

  \n
  • How much annual income do you anticipate needing during retirement?\n
    
  • When do you want to start receiving the extra income?\n
    
  • How long will you need this income?\n\n\n

    Not all of these questions will have a quick answer and may even require a best estimate rather than a firm number. You also want to consider:\n

    \n
    • Longevity: many people tend to underestimate how long they need retirement income\n
      
    • Inflation: costs for goods, services, and healthcare are rising\n
      
    • Market Risk: it\u2019s important to find a balance for long-term growth without the risk of extreme losses\n
      
    • Lifestyle: if you spend too much too early, you risk depleting your resources quickly\n\n\n

      It\u2019s always beneficial to know when you want to retire and how much you\u2019ll need, but discussing these factors with an advisor will help you get a more accurate idea of what you need and how to get there.\u00a0\n

      Strategies to Convert Assets to Income\n

      Here are some of the ways you can convert savings, investments, and real estate into retirement income and the pros and cons of each.\u00a0\n

      Bond Ladder\n

      With a bond ladder, you invest in a series of bonds with different maturity dates. As they roll over, you can use the interest as income. Bond ladders diversify your portfolio and increase your liquidity but won\u2019t produce significant returns in a low-interest environment.\n

      Purchase Annuities\n

      You can use a portion of your retirement savings to purchase an annuity. Annuities are insurance contracts that provide a single up-front payment and regular payments from the insurance company that sold you the annuity. This income can last for as long as you and your spouse live or for a set number of years.\u00a0\n

      \n

      Insurance companies calculate annuity payments based on average life expectancies, so the longer you expect to live, the more economic sense it makes to purchase an annuity. However, when you buy an annuity, the money is no longer yours, so it eliminates the opportunity for multi-generational wealth.\n

      Build a Dividend Portfolio\n

      Building a dividend portfolio means buying stocks that are paying out dividends. Your goal would be to keep the stock long-term and receive income through dividends rather than selling the stock.\u00a0\n

      \n

      We recommend avoiding high-growth, big-name companies and choosing well-run companies with a consistent growth and success track record. Many of these stocks can yield between 3% and 6%.\n

      Real Estate Properties\n

      When you purchase a rental property, you will have to cover the down payment cost, but in some areas, this can be as low as $10,000. You can then rent the property for more than the monthly expenses, allowing you to earn a few hundred dollars a month per property.\u00a0\n

      \n

      One benefit of this strategy is the high return. You will also receive tax benefits due to the depreciation of the properties, and the cash flow you make from these rentals will not be taxable.\u00a0\n

      \n

      Because of the initial down payment, it may take some time to recuperate your investment. You also want to ensure that your chosen properties will benefit your strategy and be attractive to potential renters. You only make money from these investments when you have tenants.\n

      Find the Retirement Strategy that’s Right for You\u00a0\n

      Deciding on a passive income strategy is just one aspect of creating a strategic retirement plan that meets your needs and your desires for life and legacy.\u00a0\n

      We want to help you live out your values in retirement with purpose, clarity, and confidence. Contact us today to schedule a consultation with one of our financial advisors regarding your retirement plan!\n

      \n

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      Past performance may not be representative of future results. \u202fAll investments are subject to loss.\u202f Forecasts regarding the market or economy are subject to a wide range of possible outcomes. \u202fThe views presented in this market update may prove to be inaccurate for a variety of factors.\u202f These views are as of the date listed above and are subject to change based on changes in fundamental economic or market-related data. \u202fPlease contact your Financial Advisor in order to complete an updated risk assessment to ensure that your investment allocation is appropriate.\u202f\u202f\u00a0″,”text_align”:”left”,”text_size”:”small”,”text_color”:”muted”}}]}]}]}],”version”:”2.5.9″} –>