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By Marty Pay
MBA, CLU, LUTC-F, contributing writer 

Streams of income

Marty's Musings


September 30, 2023

Marty Pay, MBA, CLU, LUTC-F.

Clients and students in my finance classes have heard this term from me ceaselessly. I'm a firm believer in the concept of creating "streams of income" and interestingly enough, situations may create different streams for each and every one of us.

There are basic opportunities many of us share. You may have a retirement plan or a 401K plan at work. What if you leave that place of employment? You, depending on your situation, may maintain the old account while creating a different stream of income at your current employer. The plans may be entirely different, but you can keep your old plan and let it accumulate. Many people have the opportunity to create a deferred compensation plan which would give you the chance to shelter even more income for retirement.

Real estate is another great example of a stream of income. While it's harder to make the numbers work in a high interest rate environment, having a tenant make your monthly payment creates a great stream of income down the road.

Even just dropping a few dollars monthly in an IRA or Roth IRA will create a nice stream of income in time. In 2023, if you're under 50 years of age you can put $6,500 in an IRA or $7,500 if you're over 50. The trick is just to start and be consistent with making the contributions.

It's the time value of money, what Einstein called the eighth wonder of the world, that makes the difference. The cost of a couple of Starbucks drinks with a pastry a week placed in an IRA would add up to around $132,000 for a 35-year-old working until retirement age. Am I saying get rid of your little fun pleasures? Of course not, but I am saying just a little planning can create another stream of income. As Albert once said, the time value of money can work for you or against you. There are plenty of great real estate agents and financial planners in Tehachapi to help you start a program. Your older self will thank you down the road.

Marty Pay is a contributing writer for The Loop newspaper and has been a Financial Planner for years and teaches Finance at a local University. He can be reached at Farmers Insurance in Tehachapi (661) 822-3737.


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