Easy Money: Why Income is Important
There comes a point in everybody’s life where they need their investments to start paying them. What does income have to do with this need? Income is the last of The 5 Needs of Money, and the reason I leave it for last is that most people need income on their investments when they retire. So, there are three stages of money. There’s accumulation while you’re working and making money, there’s distribution when you’re retired and you’re starting to distribute the money that you’ve earned, and then there’s inheritance, which I discussed in detail in my article about Death Benefit.
So when you retire, you’ve gotten to the point where now you’re no longer earning any more money and you have to start distributing the money you have. And that’s where income comes into play, and income is exactly what it sounds like. Now that you’ve stopped working, taking the investments that you’ve saved up and distributing those out as a source of income, just like if you were working, but instead, it’s from your own savings.
And the key to income is knowing what type of income you need. Do you need it to last the rest of your life? Do you need it to last until you can go on Medicare when you’re 65? Do you need it to last just until your mortgage is paid off, or your kids are out of college, or even if you have student loans to be paid off? Believe it or not, we meet with some clients that are 65-70 years old and still have student loans. So while income is important, you need to evaluate and know what type of income, and when you need it.
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