6 Ways to Diversify Your Retirement Income

No matter what stage in life you are at, there comes a time for us all to think about retirement. I know when I was younger it was something that I figured I would think about someday. Which was poor planning on my part, obviously. Now, over half my life later, I kick my younger self regularly for her stupidity. So even if you don’t think you need to think about retirement yet, you should be. The earlier you start, the better off you should be and the earlier you might potentially be able to retire. Therefore, we are giving you six ways to diversify your retirement income for overall long term success.

Create Passive Income

Creating passive income is a biggie in my book. While we are going to discuss a few other ways to help fund your retirement, if you can create passive income now that is long term, then you are really ahead of the game.

Passive income isn’t always as passive as it is portrayed. But anything that doesn’t require regular attention or work from you but still generates income is considered passive income.

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Real Estate Investing

One of the top ways to create passive income is through real estate. There are a few different ways to achieve this, but buy and hold real estate is usually the most lucrative option. Purchasing buy and hold real estate is when you buy rental properties and keep them rented as often as possible. A lot of investors prefer to have a property management company because then it is less time they have to spend on their investments.

Becoming an investor through a lending trust is another way to create passive income through real estate. This is when you invest money into a lending trust for a certain property with a specified rate of return and timeline. These usually have shorter timelines, so you usually get your money back (with interest) within a year. If you aren’t the one setting it up and managing it, then it really is pretty passive, and the rates hover around 10% a lot of times.

Investing in a REIT is one more way to create some passive income in real estate. These are Real Estate Investment Trusts. The way they work is also fairly simple. Instead of becoming a landlord, and dealing with some of the associated headaches, you can invest in a REIT instead. These are usually larger portfolios containing multiple buy and hold rentals that you get a percentage of the rate of return on. You won’t usually be making 10% on your money, but it can be somewhere between 6% – 8% usually. This is still a lot higher than your high yield savings account, so it is a good thing to have in the mix.

Other Options

Another great passive income stream can be through investing in the stock market. While this can be risky, as all investing really is, you can get some pretty decent regular returns. You just need to look at the average rate of return overall to see that more often than not you can bring in a lot more than the average high yield savings account will. Picking the right stocks and ensuring that you diversify your picks are important for success with this option.

Also, keeping your money in the market longer term, instead of regularly buying and trading, will help keep your returns higher. If you aren’t sure where to start, or want a bit more guidance, StockpileΒ is a great resource to check out!

But, if you aren’t interested in these options, or you want to diversify as much as possible, there are some other options for creating long term passive income. They are:

  • Writing a book
  • Creating e-courses
  • Creating graphics and selling them online
  • Taking pictures to sell on photo sales websites
  • Peer-to-Peer lending with sites such as Prosper
  • Rent out rooms in your home (requires a bit more work on your part regularly)

And don’t forget that secured loans are always a potential backup financial option, they are typically offered at lower interest than non-secured loans and more competitive rates are available. Read more about loans for pensioners here.


One of my other favorite ways to diversify my portfolio, and create long term income, is through my Roth IRA. Right now you can contribute up to $6000 per year into a Roth IRA with after tax money. This means that whenever you withdrawal the money during retirement, you don’t have to pay taxes on any of the funds you originally contributed. This is due to the fact that you already paid taxes on it before you contributed it. So you will only have to pay taxes on the part of the distributions you take that is from money made on your contributions. I love this because it means fewer taxes for me in the future that I will have to pay!

Another IRA option is a Traditional IRA. You can contribute money into these with pre-tax money, so you can potentially get a tax write off now. But, keep in mind that you will have to pay taxes on the full distribution when you take it in retirement.

If you don’t have one set up already, there are some great robo-advisors out there. Betterment is who I have been using, and I love them! They help you get set up, make it fairly painless to contribute money and run/adjust your accounts for you regularly, so you don’t have to. These are definitely great ways to help fund your retirement now that can be pretty passive also.


If you happen to work for a company that has a 401k, then you should really be taking advantage. Most companies offer a matching plan of some sort, which basically equates to free money. If I wasn’t self-employed, I would be looking for a company that offers a 401k to invest in.

When you invest in a company 401k, the money you contribute comes out pre-tax, so you should be able to use your contributions to reduce your taxable income annually. Plus, the company is matching up to a certain percentage of what you contribute, for an added bonus to your future self.

Just make sure to look closely through the 401k offerings to make sure that you align with all of the investments chosen. If you don’t, speak with your company fund manager to see if there are any other company options for you to invest in. Sometimes, companies will have a few different options to choose from, so choose wisely for the best long term benefit.

Just remember that once you start taking disbursements from your 401k during retirement, you will need to pay taxes on that money.


Health Savings Accounts are another great way to diversify your retirement portfolio. Not all companies offer them but if they do, take advantage.

How these work is fairly simple. You can max out your contributions to your company HSA annually and pay for medical expenses out of it. Any money not used can then be taken as disbursements during retirement for any reason, not just medical.

The caveat is that whatever money you take during retirement that is not used for medical expenses will be taxed. However, if you choose to pay for your medical expenses out of pocket now instead, and save all of your medical receipts, you can then use those during retirement to pay yourself back from the HSA and not have to pay taxes on the money. I love this trick!

Social Security

Collecting social security is something that we all would like to add into our retirement portfolio. But, with the way things have been going, the chances that the younger generations will have any social security to claim, is slim to none.

While this is not something we should count on actually being an option for retirement, it is nice to hope. Therefore, social security is a part of the retirement portfolio that you can add in as a possibility for diversification. You can figure out how much you might potentially be getting in social security by using this calculator by the Social Security Administration.


Pension is another category that a large percentage of us won’t be getting. But if you happen to be lucky enough to work for one of the few companies that still offer a pension, this is another way to diversify your retirement income.

Most pensions can grow an average of 6% per year, so the longer you can wait to take your pension, the more money you will have in the long run.

Retirement Portfolio/Income Summary

Overall, there are a lot of ways to diversify your retirement portfolio/income. First and foremost is to create as much passive income while you are still working as possible. This way you will have continued income streams during retirement so that you won’t have to pull as many disbursements from your retirement accounts.

This continues to keep your diversified retirement funds growing in interest, which only nets you more money during retirement.

Next, make sure that diversify your retirement accounts as much as possible. Each and every type of account grows differently, and will perform differently throughout the years. So the more diversified you are, the higher your chance of a more comfortable retirement.

So, to recap, the 6 ways to diversify your retirement portfolio/income are:

  1. Create Passive Income
  2. IRA’s
  3. 401k’s
  4. HSA’s
  5. Social Security
  6. Pension

Once you have things rolling in all of these categories, then just continue to contribute as much as possible prior to retirement. By doing so, you might be able to not only retire earlier, but also have more money in retirement so that you can enjoy it to its fullest.

Which ways have you diversified your retirement portfolio/income for maximum impact?