How to Generate Retirement Income

A key element of planning for your retirement is making sure that you'll have sufficient income after you retire. A portion of that may come from reliable sources like a pension plan, government benefits, annuities and perhaps part-time employment. But after that you may be counting on your personal retirement savings.

Most people need to withdraw some money from their portfolio, so having the right mix of investments to generate sufficient income and growth is important. You also might want to consider consolidating your accounts. It can help you gain a clearer picture of your retirement savings and the withdrawal amounts that may be needed from both your registered and non-registered accounts.

The amount you withdraw from your portfolio can depend on factors such as your age, risk tolerance, how your money is invested and the desire to leave a legacy. Everyone's situation is different, but retirement can last 20 years or more, so an initial withdrawal rate of 4% can be a good place to start. A moderate withdrawal rate allows you to be more flexible because your income needs may rise and fall.

Regarding the make-up of your portfolio, it should provide you with an appropriate amount of income.

This can come from guaranteed investment certificates and individual bonds, which can help provide a predictable flow of income. Some people decide to invest only in GICs because they provide income with less risk. But remember that GICs alone likely won't provide a return that can keep pace with inflation, particularly with current rates being where they are today.

As for stocks and mutual funds, you should look for those with a history of paying dividends and increasing them over time. As companies grow and improve their earnings, they often increase their dividends, which is the equivalent of giving you a raise. Although equities possess more risk relative to bonds, their growth potential can help protect against inflation.

To help reduce risk, consider buying quality that you can hold for the long term -- and don't overlook the importance of diversifying your investments. While diversification does not guarantee a profit or protect against loss, it has proven over time to be an effective investment strategy.

Life annuities and Guaranteed Minimum Withdrawal Benefit plans may be another option for some of your retirement income.

With these options, which can be customized to meet your retirement needs, you would essentially entrust money to an insurance company in exchange for a guaranteed income stream that will last your lifetime and pay for your necessary living expenses.

Speak with your financial adviser to create a long-term strategy that can help meet your needs today and into the future.

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