6 Ways to Build Multiple Retirement Income Streams Before You Hit 60

As you approach retirement, you should be thinking about how you'll get the income you'll need. Ideally, long before you retire, you should come up with a comprehensive retirement plan. (Many people shoot for a million-dollar nest egg, but depending on where you live and your spending patterns, $1 million could be much more or less than you need.)

Don't just assume Social Security will provide much of your income, because it's facing some problems -- and even if it weren't, it likely wouldn't provide as much income as you might think. Most people would be well served by setting up multiple retirement income streams, and it's smart to start doing so well before you turn 60.

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The problem with Social Security

First of all, the average monthly Social Security benefit for retirees was only $2,008 as of August -- amounting to a little over $24,000 a year. Even if you received 50% more than that -- around $36,000 annually -- it likely would be far from what you need or want in retirement.

Making matters worse, Social Security's surplus is turning into a deficit. It's been estimated that by 2033, there will only be enough money coming into the program (mainly via taxes on workers) to pay beneficiaries 77% of what they're owed. The good news is that there are multiple ways to fix the problem, but the bad news is that Congress will have to enact them -- and we can't count on the current Congress to do so.

A sensible strategy here for most (but not all) people, if you can pull it off, is to delay claiming your benefits in order to maximize them. Various studies have found that most people would do best by waiting until age 70.

Multiple revenue streams

Given all that, it's smart to aim to set up multiple revenue streams for your future (and to have an effective strategy for how you'll withdraw money from your nest egg). Here are six possibilities:

1. Pension income

If you've worked for an employer that offered a pension -- such as a school or government office -- you can include pension income as part of your retirement income. If you have not done so and you're still years away from retiring, you might seek out such a job in order to build some pension benefits.

2. Dividend income

It's hard to beat income from dividend-paying stocks in retirement, because that income will arrive fairly regularly no matter what the economy is doing. Any healthy and growing dividend payers in which you've invested are likely to continue beefing up their payouts over time, too, which can help you keep up with inflation.

You won't even have to sell shares for this income. Let's say you have a portfolio of stocks worth $400,000, with an overall average dividend yield of 3%. That sets you up for about $12,000 in annual income -- equal to around $1,000 per month. So consider adding compelling dividend payers to your portfolio. (There are also some terrific dividend-focused ETFs.)

3. Interest income

Interest-paying investments are another potentially good income generator, as long as interest rates aren't too low. These days, you can find certificates of deposit (CDs), high-yield savings accounts, and money market accounts yielding 4% or more. With a $100,000 investment, that's $4,000 per year.

4. Rental income

If you're comfortable owning real estate and being a landlord, you could generate retirement income from rent checks. It's not as easy or lucrative as it might sound, though, as you'll be responsible for taxes, insurance, and upkeep for your properties.

5. Annuity income

One or more annuities can also deliver regular income. Read up on them first, and consider favoring fixed annuities, as they're less complicated than some other types.

6. Retirement accounts

Many of us have been investing in IRAs and 401(k)s throughout our working lives. Those will be great sources of income in your future. So aim to invest regularly in them while you're still working.

These half-dozen options are not your only alternatives. You might also generate retirement income by renting out space in your home, or by making and selling crafts, or by holding a part-time job in the early years of your retirement. A reverse mortgage or selling a life insurance policy could also work.

Here's how a multi-income retirement might look:

Your particular set of income streams could look a lot different, of course. Take some time to think about and estimate how much income you'll need in retirement, and how you'll get it. Some of the strategies above might serve you well.