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Don't Fall Into This Retirement Income Trap

We all need income when we retire. But what many people don't understand is that your investment portfolio doesn't have to generate all of your cash flow from dividend or interest income. That mistaken belief can trap retirement investors, forcing them into risky investments that they don't understand.

In the following video, Dan Caplinger, The Motley Fool's director of investment planning, looks at this retirement income trap and how to avoid it. Dan notes that one reason that high-yielding investments Annaly Capital (NYSE: NLY  ) and American Capital Agency (NASDAQ: AGNC  ) have been so popular is because of their high dividend yields, despite the risks that they have in rising interest rate environments. Dan also notes that high-yielding dividend stocks often cut their payouts, citing CenturyLink (NYSE: CTL  ) as an example from last year. Dan suggests that the better approach is to focus less on income and instead provide for predictable withdrawals from retirement investments, even if it requires selling shares of stock.

How to get even more income during retirement
Most retirees rely on Social Security to take care of part of their cash needs, but it's not the only way to boost your retirement income. In our brand-new free report, our retirement experts give their insight on a simple strategy to take advantage of a little-known IRS rule that can help ensure a more comfortable retirement for you and your family. Click here to get your copy today.

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Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On April 14, 2014, at 3:55 AM, GRKRaj wrote:

    Hi, I know the traps of American people gets when they take retirement.

    In India, poor teachers when retired, if deposit or savings and pension , Mr Chidambaram, great cunning Finance Minister of India, made us to pay income on the deposits; Is it honorable for this fellow.

  • Report this Comment On May 09, 2014, at 5:57 AM, viksar wrote:

    Not just that, GRKRaj...the extortionist chidambaram will force a person to pay tax even in the name of his expired parents, and the person will be responsible in case his expired parents made any mistakes in their old tax returns.

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Dan Caplinger

Dan Caplinger has been a contract writer for the Motley Fool since 2006. As the Fool's Director of Investment Planning, Dan oversees much of the personal-finance and investment-planning content published daily on With a background as an estate-planning attorney and independent financial consultant, Dan's articles are based on more than 20 years of experience from all angles of the financial world.

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9/1/2015 2:02 PM
AGNC $19.07 Down -0.06 -0.31%
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Annaly Capital Man… CAPS Rating: ****