Don’t Put All Your Retirement Income Eggs in One Basket

Diverisfy Retirement USAA Community.jpeg


Any discussion on the fundamentals of building an investment portfolio is likely to include the concept of “diversification.” The ideas of not putting all your eggs in one basket, having some investments zig while others zag, and participating across a variety of market segments are core to portfolio construction. 


Of course, investing is a means to many ends. For just about everyone, one of those goals is to build a nest egg that will allow you to live the life you want to live in “retirement.” The definition of retirement has evolved over the years. More options, more activities, and sometimes – in a counterintuitive way – different or more meaningful work have all been part of the shift. However, despite all the change, one thing remains constant: the need to create retirement income. Your retirement vision may impact the amount and importance of building income streams in retirement, but, likely, not the need. 


This brings us full circle. While diversification is an oft-discussed element of investing, it’s less associated with building retirement income plans. That shouldn’t be the case. Diversification can be a cornerstone, whether you’re accumulating or utilizing your portfolio. 


Here are five ideas to consider as you build your own diversified retirement income plan: 


  1. More income streams, more flexibility. In a perfect scenario, a single guaranteed, inflation-adjusted stream of income would more than eclipse your needs. For most, a more realistic scenario includes several sources of income that can be adjusted based on market and economic conditions, as well as changes to your personal situation. Naturally, you have greater control and options if you have more sources to leverage. 

  2. Taxes matter. Building a plan that includes sources of both taxable and tax-free income streams is a game changer. The tax code and tax brackets become your own personal playground as you make decisions to increase, decrease or eliminate various types of income to manage how much you pay in taxes. This flexibility is most easily created early in your accumulation journey with a tax-diversified approach to retirement investing. Roth conversions, permanent life insurance, municipal bonds, and careful use of retirement plan and IRA distributions could all be part of the mix.  
  3. Guaranteed is good.  Safe, stable, and reliable income is a beautiful thing. That’s especially the case during turbulent times. We don’t have to push our memories too hard to recall wild market swings, scary headlines, and a lot of uncertainty. Times like those highlight the benefits of income streams from employer pensions, military retirement, certificates of deposit and immediate annuities. But guaranteed often comes at a cost…

  4. A dollar today is not a dollar tomorrow. Unfortunately, many guaranteed streams of income don’t account for inflation. Military retirement is a notable, and extremely valuable, exception, but the majority of corporate pensions, government pensions and retail-purchased immediate annuity options don’t include an inflation adjustment. If they do, it’s an expensive add-on. Income sources from dividend-paying stocks, convertible securities and real estate investments may all help on that front. Diving into the details is outside the scope of this article, but inflation clearly provides a solid inspiration for diversifying your retirement income streams. 
  5. Smart Social Security choices. According to Social Securityabout 90% of Americans over 65 receive income from this program. That makes it very likely that it will be part of your diversified retirement income plan. However, it’s important to make smart choices on timing, to leverage retirement credits and to understand survivor benefits in order to make the most of your own Social Security benefit.  

Creating and utilizing multiple retirement income streams will put you in better position to, yes, live your retirement dreams. 


Related post:

5 Money Mistakes to Avoid


About the Author: JJ Montanaro is a Certified Financial Planner® professional and part of the Military Affairs team at USAA. He’s a graduate of the U.S. Military Academy and has over 20 years of financial planning experience.




New Member

I feel very uncomfortable with my USAA investment, small as it is, although your insurance is fantastic.  With regard to the investment, it is not growing appreciably although that is very difficult for me to tell since you have turned it over to Victory Capital.  They do not respond, provide no updates at all, even annual.  At least when you controlled it, I could actually talk to a live person to assuage my fears.

Chetty Joe
Occasional Visitor

I feel USAA abandoned those like me who had money invested in their programs. Mine were turned over to Charles Schwab who I did not enjoy working with, so I pulled my funds. It seems once USAA went prime-time with their television adds, everything stared to change. They have become more just an insurance company with checking and ultra-low interest bearing savings. I recently placed $100K in my USAA savings account to see what interest would occur in one month -- I made 63¢. That is about the same as any other bank's savings account. In USAA's favor, they are the best auto insurance company available. They may be very good with home and property insurance but in my 40+ years of coverage I have never made a claim, so I cannot attest to their quality in that area.

Robert - M60
Regular Visitor

Very disappointed in recent changes. Move to Schwab was poorly done. It is almost impossible to reach a human with all your automation, something we older vets appreciated. Also now previous connections to a trusted individual no longer work. What did you do with this relationship connection. Please reinstate your previous communication policies that made USSA the best choice for Veterans 


With inflation rising and interest rate lowering , it's a no-brainer to pull out of USAA account.


buster 706

As a member for a long time I see things a bit differently. They were the leading insurance company in the country with reasonable rates and good service. Their annunities led the field in both return and security. Then they decided with no real experience to get into financial services. With the expansion their customer service suffered because they couldn't attract and train enough good representatives. They from what I understand lost money on both the mutual fund and brokerage business. I doubt they made much if anything when they dropped/sold/exited those two efforts. Now they are trying to get back to the basics and we'll see if they can retun to their past leadership in the insurance business. Their rates on auto insurance are competitive as for annunities they are very low but I haven't shopped their competition. Thank you

Frequent Contributor

Higher premuims and poorer customer service (reps are nice but good luck getting throught the Artificial un-Intelligence phone system then not getting transferred twice more).  33 years a member and just dropped 3x homeowner policies and 2x auto, and pared way back on the banking (switched direct deposit).  All previously unthinkable in my book.  It used to be a milestone upon commissioning to be eligible for USAA - and mostly by word of mouth/mentor recommendation.  No more.  USAA Incorporated is here with all corporate "businessmen" at the helm who see "members" simply as counumers and market share.... so time to act as a typical "consumer" with my feet vice a loyal "member" of what was once a truly unique organization.  Not a "mad" comment, but a sad commentary.


Each time I try to like a comment it returns me to a logon does not accept my input

Briana Hartzell USAA

Hi @Alschief 

Thanks for letting us know, I will investigate. 

Prolific Contributor

This roughly reminds me of the free advice that I received from a financial planner, in 1989. What got me to embrace the concept was the story he told.  It went something like this:

According to the U.S. Department of Commerce, if you take 100 people (on equal basis) and follow their lives until 65 years old, you will discover:

  1. One will be wealthy
  2. Four will be comfortable
  3. Three will have to work
  4. Twenty-nine will be dead
  5. Sixty-three will be dependent on others (which include social security).

People did not plan to fail, just fail to plan.

Then, he continued: Retirement can be view as a stool. A three legged stool is stable. But, a four legged stool is better. Steams of income can be represented by the legs of a stool, the more the better.

Next, he laid out a path:

  1. Retire from the military
  2. Find a job that has a pension program and retire from it
  3. Saving as much as you can
  4. Avoid debt
  5. Social security will be there

So, I decided to seek to live comfortably, if I am still living. I started eliminating debt, saving what I could, retired from the military and sought out employment that included a pension. That advice has served me well. So far, I am on track of achieving my goal.

Briana Hartzell USAA

Thank you for sharing @G-11 - I like the way your plan is easy to follow and has clear actions to plan for.