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What Is the Worst Thing That Could Happen to Your Retirement Income Flows?

October 30, 2012
Intelligent Speculator

Intelligent Speculator

6 followers
Every month, I now publish my passive income report where I discuss the different income flows that I currently have and that I’m working on getting between now and my eventual retirement. Even though I have no plans to retire anytime soon, I still hope to be financially independent within a decade or so.

Increasing Passive Income Is Not Enough

I am always looking to increase my passive income, the money I can generate from my retirement accounts, my online company, etc. That being said, it’s not enough for me to simply increase that amount. I’d like to become more diversified over time in terms of the sources of my income. For example, a few years ago, all of my passive income was generated from my online company. It had two big sites that generated money from one source. Since then, we’ve diversified and now have about 10 major sites with many more different sources of income. I also have a bigger and more diversified retirement account and am looking to add other sources such as real estate, an offline business, etc.

Always Keeping in Mind “Worst Case Scenarios”

I’m an optimistic guy by nature so I do try to always see things as being “half full”. That being said, it’s also important to prepare for the worst. I see many people out there building a retirement plan that depends greatly on the federal government for their pension, medical insurance, etc. I hope that by now you know that no entity, especially governments are immune to going down if they lose control of their fiscal situation. The US government, like many European ones continues to accumulate deficits, rising debt with no end in sight. I’m hopeful that at some point the government will get its act together, hopefully before it’s too late. But I certainly don’t want my family to depend on those guys in Washington getting it done.

Real Estate Has Its Dangers Too

I also know of plenty of people that end up building solid retirement income through real estate and while I intend to build some, there’s no doubt that there is danger. Just think of the current hurricane Sandy and the massive losses it will generate. Sure, you might have home insurance and even flood insurance but there will still be massive losses. Even if your house ended up being rebuilt, what happens to its value if the neighborhood loses much of its appeal?

Dividend Income Is More Diversified…

It’s true that I feel confident that my dividend portfolio is very safe and it’s unlikely that the income it generates will diminish if I get rid of poor stocks before they cut dividends. That being said, if I think about what happened to the financial sector just a few years ago and how all of these huge banks suspended their dividends, I have to think that it’s not bulletproof either because if the whole economy went back into a recession, my income could easily be affected.

I know that I’ll never protect myself fully because the range of outcomes is so incredibly huge. I am doing my best to be as diversified as possible though which will hopefully mean I’d need many different very improbable events to happen to have a serious impact on my retirement passive income flows.

What are you doing to protect yourself? Is your income all from one source? Could it be taken away if something happened to your pension, the markets, the government, etc?

Rating: 2.8/5 (6 votes)

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