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Coasting in Retirement Ep 7: 5 Ways to Generate Income in Retirement, Part 2 Thumbnail

Coasting in Retirement Ep 7: 5 Ways to Generate Income in Retirement, Part 2

Josh and cohost Michelle finish discussing ways to use both your investment assets and possibly your real estate holdings to generate passive income.


  • An investor purchases multiple bonds or CDs with different maturities. As each bond or CD matures, you can reinvest the principal in new bonds with the longest term you originally chose for your ladder
  • If interest rates move higher, you can reinvest at higher rates. If rates fall, you’ll still have some bonds locked in for the longer term at higher yields
  • Since many bonds pay interest twice a year on dates that generally coincide with their maturity date, investors can structure predictable monthly bond income based on coupon payments with different maturity months as well as years

Segment 1 (Show Open):

Good afternoon everyone and welcome to Coasting in Retirement! I am your host, Josh Null, and I’m joined by my co-host, Michelle Lee Melton. Michelle, how are you doing? Well, after an extended Mardi Gras break, we are back with another great show today, record yet again in our brand-new state of the are Jubilee Studios in Daphne, Alabama! First, for those new to the show, I am the owner of Gulf Coast Financial Advisors, an independent financial planning firm based out of downtown Fairhope, Alabama that serves clients up and down the Gulf Coast. You can learn more about us on our website at Gulfcoastfa.com, and we will repeat our contact info several times throughout the show. As always, Michelle and I are here today to discuss financial topics relevant to those in or near retirement living their best life along our part of the coast. 

Today Michelle and I are going to finish up part 2 of a 2 part series we called “5 ways for retirees to generate income in retirement”. We laid out the first 3 ways to generate income in our last episode, and today we’ll discuss the last 2. For you listeners that want to hear our previous discussion, simply search “Coasting in Retirement” on the Spotify app and find episode 6. 

We felt it was important to discuss ways to produce income in some depth because income tends to be something near and dear to all of us. When you’re still working and collecting a paycheck, generating income can be as simple as getting out of bed and going to work. But happens when you’re no longer working? You still need to generate income. What are some ways to do this? We have some ideas and concepts for you all to consider as we will discuss ways to use both your investment assets and possibly your real estate holdings to generate passive income.

We’re going to refresh everyone’s memory by providing the full list of 5 ways to generate income, but before we do that, let’s add a short disclaimer. Just like last week, by no means is this list meant to be a complete or exhaustive list of generating income in retirement. For example, some folks in retirement lend money to a younger working generation, similar to a bank lending money to a borrower, except in a private transaction, and typically for an agreed upon interest rate. This example fits the definition of generating income in retirement but is not something I would say is a common method. We’ve only got 1 hour to get to all of our great information so were going to keep our list to strategies that should be familiar, and accessible, for most investors. As always, we are going to steer clear of any “golden ticket” strategies, and remind everyone that all investments, no matter what anyone tells you, involve risk. Last note - as you will learn in this episode, most financial advisors, including me, use some combination of these strategies to spread the risk, often in what is called the “bucket approach”.

So with all that said, Michelle, would you be so kind as to lay out our complete list of 5 ways to generate income in retirement again? After you do that, I’ll dive in deeper on the last 2 on the list:

Michelle: Alright Josh, in no particular order: 

  1. An investment account designed using what is called the “total return approach” 
  2. Income Annuities
  3. Real Estate Investment Trusts, or REITs. Note: access to private or non-traded alternative investments may have additional requirements in order to be able to participate. Please visit www.sec.gov for more information on accredited investor and qualified client requirements.
  4. Laddering bonds and/or certificates of deposits (CD’s)
  5. Rental properties, such as Airbnb and VRBO

Josh comes back in: Very good. So, Michelle, let’s start with number 4 on our list, laddering bonds and/or CDs. Let me start with a question for you: what has been your personal experience with bank CDs? Do you ever recall your parents or grandparents mentioning them? Very good. Let’s start with defining what we mean when say laddering bonds or CDs: bond and cd laddering are kissing cousins of the same strategy. An investor purchases multiple bonds or CDs with different maturities. As each bond or CD matures, you can reinvest the principal in new bonds with the longest term you originally chose for your ladder.  

If interest rates move higher, you can reinvest at higher rates. If rates fall, you’ll still have some bonds locked in for the longer term at higher yields.  

The “ladder” refers to the portfolio of individual CDs or bonds that mature on different dates. This strategy is designed to provide current income while minimizing exposure to interest rate fluctuations. Instead of buying bonds that are scheduled to mature during the same year, you purchase CDs or bonds that mature at staggered future dates. Spreading out maturity dates can help prevent investors from trying to time the market. Staying disciplined and reinvesting the proceeds from maturing bonds can help investors to ride out interest rate fluctuations. 

An investor is trying to both manage interest rate risk and cash flow with this strategy. By staggering maturity dates, investors avoid getting locked into a single interest rate. A ladder helps smooth out the effect of fluctuations in interest rates because there are bonds maturing every year, quarter, or month, depending on the number of rungs in the ladder. When a bond matures, an investor could reinvest that principal in a new longer-term bond at the end of a ladder. If interest rates have risen, they’ll benefit from a new, higher interest rate and keep the ladder going. If interest rates were to fall, unfortunately the maturing bonds would likely be reinvested at lower rates, but the bonds at the end of the ladder will have likely locked in higher yields already.

Since many bonds pay interest twice a year on dates that generally coincide with their maturity date, investors can structure predictable monthly bond income based on coupon payments with different maturity months as well as years.

Rungs, spacing and materials.

Alright, let’s pivot to the last item in our list, investing in rental properties to generate income in retirement. For the record, I am a financial advisor, not someone that helps people invest in real estate, like a real estate agent would. But many of my clients have rental properties and it absolutely becomes a key part of their financial planning process. Michelle, let me ask you a question – I know you’ve used Airbnb on the consumer side, but do you have any experience on the landlord side? So when we talk about being a landlord in this episode, we’re going to narrow our discussion to the most common type of landlord – single family. Of course there are many multi family and commercial rental income opportunities out there, but most folks start on their landlord journey by renting our their previous primary residence, so we’ll focus on that. Plus we’re going to distinguish between short term rentals and long term rentals. Short term rentals historically have been defined as 90 days or less, but companies like Airbnb and VRBO have really reduced that to a week or less. 

So in my opinion, 2 things have happened in the single family rental market. Both involve tech. For long term rentals, the rise of real estate management companies has made it much more realistic for everyday investors to rent a property. Historically most small landlords needed to also know how to do a lot of maintenance on their own, and while that could still be true in some areas, most robust rental markets like our part of the Gulf Coast have several qualified property management options. The underlying tech these companies use make it so much easier for a property owner to have an “arms-length” relationship with the tenant, which is what many landlords desire. In the short term rental, I would argue that companies like Airbnb and VRBO had a similar effect on the travel industry as Uber had on the yellow cab industry. It’s very common for someone to shop both hotels and Airbnb’s in an area they are traveling to, and if they are traveling with a large group, I personally think a single family residence will beat out separate hotel rooms anyday. 

Just remember, when you turn your single family primary residence into a rental property, you know are dealing with things such as Schedule E’s on your tax return and taxable income, and potential capital gains if you sell the investment property, so consider adding a CPA to your financial team. 

Let’s close out our segment with a call to action for any of you listeners that have questions or concerns about your current investment strategy, or maybe you’re not comfortable doing it yourself. Remember at Gulf Coast Financial Advisors we offer both investment management and comprehensive financial planning services. For those in or near retirement, here is our basic process: 

  • First we figure out how much you’ll need for the retirement you’ve been dreaming about
  • Next we uncover the main risks posing a threat to your retirement, including inflation, stock market volatility, potential tax increases, skyrocketing health care costs, etc
  • Then we discuss options for generating income in retirement and putting your investment portfolio to work doing specific jobs, such as battling inflation
  • Finally we discuss how to keep your current standard of living in retirement, even as costs keep rising.

The strategies we use are designed in part to help you with income production as well as inflation and longevity risks. Not only are we trying to match your risk tolerance with your investment holdings, we want to help make sure you don’t end up outliving your retirement savings. If you’re interested in having that conversation, give us a call at 251-333-5151, or find us at gulfcoastfa.com. That’s gulfcoastfa.com.

Alright folks, coming up next - There’s always a lot going on in the world! Particularly the world of finance. Every week Michelle and I scour the interwebs for helpful financial articles related to our topic of the day, especially articles that pertain to those in or near retirement. Join us after the break to hear Michelle and I discuss this week’s relevant headlines in our “Michelle with the News of the Week” segment. Stay tuned!

Segment 2 - Michelle with the News of the Week:

Josh: “Welcome back to Coasting in Retirement, your host Josh Null here! As we discussed before the break, every week Michelle and I scour the interwebs for helpful financial articles related to our topic of the day, especially articles that pertain to those in or near retirement. Coasting in Retirement’s co-host Michelle and I are going to help you all understand and decipher the deeper meaning of those headlines, or at the very least, provide context. So with out further adieu, here’s “Michelle with the news of the week”!:

1. Michelle: Alright Josh, were going to start with a new site we found called Bankrate. This article is titled “A Retirees Guild to Hosting on Airbnb”. This article states that the average Airbnb investors made $13,800 during 2021. I did some further research and it appears this number jumps around a little of different sites, and possibly even dipped in 2022 as the Covid effect eased some, but all the available data still points to the fact that Airbnb can be a viable source of rental income. I’ve hosted an Airbnb in the past and found that it worked reasonably well. What say you about this as it relates to investors interested in rental income in retirement? 


2. Michelle: Back to our old friend, Investopedia. Their site has a recent article titled “4 Sources of Income for Your Retirement”. So first, Investopedia, get with the program, odd numbers are were it’s at, plus 5 ways to generate income in retirement gives more options that 4. That said, this article discussed a concept you discussed in the opening, systematically laddering CDs. I kind of remember my grandma doing this when I was kid, but can you explain why more about this, especially why it’s back on the radar of investors? 

 Josh: Discuss bank CDs vs brokerage CDs. Compare rates over the past 20 years with current rates. Discuss pros / cons


3. Michelle: Alright Josh, let’s pivot to Forbes. They have an article titled “How to Create a Paycheck for Retirement”. This article discusses Single Premium Immediate Annuities, which goes by my favorite abbreviation, SPIAs, but that’s not the part I want to concentrate on. My guess is that the part I want to discuss probably hurts the average investor’s brain a little. Forbes lays out the difference between “Interest & Dividend Investing” and “Total Return Investing”. It seems like these 2 concepts have some overlap, but what are the primary differences between the two, and why does that matter to investors in retirement? 


4. Michelle: I knew it. You would find a way to work in Kiplinger to this episode. Just so you could make your silly 80’s hair metal band lead singer Kip Winger reference. (Josh inserts joke). Alright, we’ll lets get serious again. Kiplinger, not Kip Winger, has an article titled “How to Create a Retirement Income Stream”. Now this article has a TON of information, so I’m going to be specific on which part I want to discuss. One section of the article discussed the bucket approach to investing in retirement, including having a safety bucket, an income bucket and a growth bucket. I get it about the first 2 but why do retirees want to still have a growth bucket for some of their investments? Doesn’t that expose them to more risk? 

Josh: Discuss why a retiree should still have some long term objectives in their portfolio, after they satisfy their income solve and safety (pillow test) needs.  


5. Michelle: OK, lets pivot to Fidelity’s site. Before I bring up the article, isn’t Fidelity one of the custodians you use Josh? (Josh – briefly discuss what a custodian is, why it matters, and that you use Schwab and Fidelity, agnostic but Fidelity nickels and dimes more). Michelle – sounds good, not on to the Fidelity article, very simply titled “Retirement Income Strategies”. This article has a lot of information that collaborates with some of our other headline articles, so let’s focus on the part where Fidelity discusses having an “Investment portfolio with guarantees”. What do they mean by the “guarantee” part? 

Josh: Discuss how we often couple an income annuity with an investment portfolio to generate income, why we don’t use all an investors’ assets in an annuity but how it can provide guarantees in retirement. 


6. Michelle: Alright Josh, back to the those fools at Motley. No, not your other favorite hair metal band, Motley Crue, but the Motley Fool! (Josh – insert hair metal band ranking here?). Motley Fool has an article titled “8 Best Strategies for Retirement Income”. Fools - odd numbers are better, remember? There’s 2 parts I want to discuss about this article. First, they discuss delaying social security to maximize the payout, which sounds good to me, but second, they discuss working a part time job in retirement! Ewww! Gross! I don’t like that part at all, but wanted to hear your thoughts on both. 

Josh: Use social security part from previous episode here. Then compare and contrast those that want to work part time in retirement, vs those that don’t (Michelle). Tie together the Airbnb conversation here, i.e., a part time job could be maintaining an investment property, or properties. 


Josh: Michelle, great job as always with the headlines, these are all important pieces of information that impacts those in or near retirement! And for our listeners are impacted by our discussion topics and interested in learning more about our strategies at Gulf Coast Financial Advisors, we invite you to take action and start a conversation about your financial plan. You can reach us at 251-333-5151 or find us at gulfcoastfa.com. 

Alright folks, coming up after the break, we get to have a little fun and I’ll probably get picked on a little bit by my co-host, Michelle in our next segment. We call it “Where Josh nailed it, where Josh was a little off”. Let me provide a little context. I’ve always had strong opinions, and I can prove it. My son Payton recently dug up some old English papers I wrote back in high school when I was his age, and I must say, I come off a little preciouses! Not that I was wrong, mind you, I’m actually proud of some of the things I believed in a million years ago in high school. So for this segment, we’re just going to go back a few years, and share some opinions I’ve made public, as an adult, that proved fairly accurate, and for balance, or at least be fair, a few where I didn’t quite stick the landing. I am human after all! See you after that break! 

Segment 3 - Where Josh nailed it, where Josh was a little off: 

Welcome back! So the point of Coasting in Retirement is to offer general financial guidance and education to those in or near retirement, which means I often give my professional opinion. And while I am proud of thought, care and due diligence I put into giving my professional opinion, both on this show and in my financial planning practice, I’m also human, which means I don’t always stick the landing perfectly. So each week I get to poke a little fun at myself by admitting to any thoughts or opinions I’ve put out there that weren’t 100% on point. BUT this segment has to be fair, so I also get to pointing to some of my thoughts and opinions that were pretty accurate. We call this segment “Where Josh nailed it, and where Josh was a little off”. Alright Michelle, what’s first?

1. Michelle: Josh, you’ve stated that even though you were just a youngster in the early 80’s, you still paid attention to interest rates because 1. you’ve always been a nerd and 2. Your Dad was in construction and you paid attention to the rates he was getting on construction and equipment loans. So having lived through that time period, albeit just a young boy, you’ve stated publicaly that you didn’t see how there was anyway both inflation and interest rates would rise to the levels of the late 1970’s and early 1980’s. So, did you nail it on this opinion or were you just a little off?

Josh: As bad as the inflation conversation got over the past few months, and even as high as bank CDs interest rate offerings have become, as of today, February 2023, we are still no where close to both the rate of inflation or bank interest rates from that time period. According to the old Annuity Expert himself, bank CD interest rates averaged 12% in the early 80’s, and the highest rate I could find thru a simple google search was Capital One at 5%. 

2. Michelle: Josh in one of your seminars from late last year, you discussed “Sequence of Return Risk”, and how you were concerned that those retiring in 2023 were facing a similar situation to those folks that retired in 2008. The main point I think you were trying to make is that all indications pointed to a significant stock market decline in 2023, possibly even a bear market, and while maybe not as severe as 2008, a significant market dip right out of the bat could set investor’s portfolios back years. As you’ve said many times before, you’re not a soothsayer, but do you feel you nailed it or you were a little off with this opinion? 

Josh: So if you put my feet to the fire as we are recording this episode in February of 2023, you’d have to say I was a little off! At least so far. And I’m usually the glass half full guy! Discuss market trends and describe what is sequence of return risk here. 

3. Michelle: According to you Josh, you’ve been a landlord in the past, both in residential and commercial real estate. And apparently the residential experience was rough enough that you’ve stated publicly that not everyone should be a landlord or real estate investor. Nailed it or little off? 

Josh: So Michelle, we discussed earlier in this episode how I’ve have strong opinions most of my life, even during times I may not have had the experience to spout my mouth off! Fortunately, I’ve grown and matured, much like Kip Winger and his music, and I’ve learned to have a more open mind. So in this opinion from years past, I definitely was a little off. The rental landscape is so completely different than it was, say, even 10 years ago. I attribute Airbnb and the like for much of this. Expound. Add why tech and property management companies have made it much easier to be a landlord and generate passive income, and also about how there is a housing shortage, so more demand than supply, tie in current mortgage rates, etc. 

4. Michelle: Well this is an opinion I’ve heard you express multiple times, both privately and publicly: while annuities can be a useful tool to generate income in retirement, they are not the “end-all-be-all”, and should be researched thoroughly and purchased carefully. You seem to have a particular sore spot for salespeople that try to hover up most, if not all, of the available assets an investor may have. So, in summary – annuities, not the “golden ticket” they are sometimes made out to be – nailed it or a little off? 

Josh: Unlike my previous landlord opinion, this is an opinion that I don’t see myself ever deviating from. So nailed it, but let me explain and provide context. Someone could hear this and lump me in with all the other commentors out there saying that “all annuities are bad.”. Listeners can go back to Ep 3 to hear why slapping this broad statement on all annuities is silly at best, disingenuous at worst. Discuss how you use annuities and the part of the market that irritates you so much. 

5. Michelle: Alight Josh, you’ve stated before that just like with annuities, REITs are an investment choice that should be researched before being bought. To get into the weeds a little further, you’ve directed this commentary specifically towards “Non-traded REITs”. Can you explain your opinion a little more in depth, and let us know if you nailed it or were a little off?

Josh: Use REIT section from previous episode, the pros and cons, then discuss that you feel you’ve nailed it, but that your opinion has softened a little because of the rise of non-traded REIT exchanges, such as Realto.ai.

Well listeners, once again I didn’t totally nail it, but I had valid reasons for being a little off. And I’m learning to be more open minded! Impressive maturity, one would say, right Michelle? To our listeners that heard us discuss something that impacts them, particularly those of you in or near retirement, you can reach out to us at Gulf Coast Financial Advisors to start a conversation. Take action and give us a call at 251-333-5151 or find us on our website at gulfcoastfa.com. Coming up next: we reach into our listener mailbag for our question of the week! Stay tuned! 


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