Wealth Management

How to diversify your sources of income in retirement

Nicolas d'Emden
30 January 2024
8 min read

When it comes to having a regular stream of income in retirement, there’s no room for complacency. Did you know that more than one in four older Australians live in poverty, and that people over 65 make up 7% of the homeless population? Knit this together, and you’re left with the stark realisation that your future comfort isn’t guaranteed.

If you’re thinking you might return to work as soon as your retirement fund starts to dwindle, think again. One in five Australians aged 55 years or over say age is a major barrier to finding a job or getting more hours of paid work.

Therefore, assuming you can simply go back to relying on a salary as your main source of income might not be much of a fall-back plan – and that’s without factoring in any decline in health or physical capability.

While there are many variables at play that could cause a decline in financial wellbeing as you get older, there are some steps you can take today to protect your financial security through diversifying your sources of income in retirement. Let’s take a closer look.

What it means to diversify your income in retirement

Diversifying your retirement income means having multiple income streams. An example is having several investments spread across asset classes like equities, shares, bonds and property. This helps you limit the impact of inflation and market volatility on your retirement savings.

While it’s easy to shy away from the idea that your later retirement years may not be as carefree as your earlier ones, consider this: Australians now live longer than ever. The implication being that your retirement could be long, and underestimating your life expectancy might put you at risk.

Fortunately, you don't have to be at the mercy of the limited income you receive from age pensions or superannuation. Having multiple sources of income means that if one goes away, you have others to fall back on.

Assessing your current income sources

Before you look into any future income opportunities, first evaluate your current financial situation. This includes assessing your existing income, ongoing expenses, outstanding loans, and savings, etc. Analysing your current financial situation helps you step back and narrow down your goals to make the right financial decisions to fund the retirement you want.

Once you know what you have, you can work out what you need. If you have any debts, consider paying them off as soon as possible since any interest you accumulate will cut into the income you rely on during retirement.

Potential sources of income in retirement

While age pension is the primary source of retirement income for most Australians, other sources of income for retirement include:

  • Investments and dividends

  • Savings and interest

  • Property and rent

  • Business and royalties

It’s also worth considering the tax implications of having multiple streams of income and how this could affect your plans.

Investing as a source of income in retirement

Diversifying your income in retirement through investments, could result in sources of passive income and help you grow your retirement nest egg over time. However, invest wisely and consider the risks involved.

High-risk investments, market volatility, and inflation could all hurt your investment portfolio and, subsequently, your retirement savings. Get the help of an experienced financial adviser to ensure your asset allocations match your risk appetite and goals for retirement.

Investments that can become potential income sources for retirees include:

Annuities and lifetime income products

Annuities are financial products typically offered by insurance companies. They involve a contract between an individual and the insurance company, where the individual makes a lump sum payment or a series of payments, and in return, the insurance company provides a stream of income, which in some cases can be for the rest of the individual's life.

Lifetime income products are financial products designed to provide a regular income for the entirety of an individual's life. Annuities are a type of lifetime income product.


  • Predictable income stream. Annuities help provide financial security through offering a steady stream of reliable income.

  • Risk mitigation. Lifetime income products can protect against the risk of outliving your savings.


  • Lack of control. You can’t choose how your money is invested or change the amount you receive in income once payments start.

  • Access. You won’t be able to withdraw your money as a lump sum and it means locking your money away until the term of the annuity expires.

  • Dependent on prevailing interest rates. Because annuity payments are often tied to prevailing interest rates at the time of purchase, starting an annuity during a period of low interest rates may result in lower income payments over the life of the annuity.

Exchange-Traded Funds (ETFs) and index funds:

Exchange-Traded Funds (ETFs) are investment funds that are traded on stock exchanges, like individual stocks. They typically aim to track the performance of a specific index, commodity, bond, or a basket of assets.

Index funds are managed funds or investment funds that aim to replicate the performance of a specific market index, such as the S&P/ASX 200.


  • Diversification. Both ETFs and index funds provide instant diversification by investing in a broad range of assets.

  • Low cost. These funds often have lower fees compared to actively managed funds.

  • Market exposure. Investors gain exposure to the overall market or specific sectors without having to pick individual stocks.


  • Market volatility. If the market or sector that the ETF follows goes down, your investment in the ETF will also decrease.

  • Currency fluctuations. If the ETF invests in assets from other countries, changes in currency values can affect your returns. Some ETFs are 'currency hedged,' which means they protect against this risk.

  • Liquidity. Some ETFs invest in assets that aren't easily traded, like emerging market debt. This might make it hard for the ETF provider to buy or sell securities when needed.

  • Tracking discrepancies. Sometimes an ETF's returns don't match the index it's supposed to follow. This could happen due to differences in assets, fees, taxes, or other factors. So, you might buy or sell at a price that's different from the ETF's actual value.

It's worth noting that while both ETFs and index funds share similarities, there are differences in how they are traded (ETFs are traded on exchanges like stocks) and how their prices are determined throughout the trading day.

Each of these financial products serves different purposes and suits different investment strategies. The choice between them depends on factors such as an individual's financial goals, risk tolerance, and investment preferences.

Real estate

Property investment involves the buying, selling, and management of properties, including land and buildings.


  • Investment opportunities. Real estate can be a profitable long-term investment.

  • Stable income. Rental properties can provide a steady stream of income.

  • Portfolio diversification. Real estate investments can diversify an investment portfolio.


  • Cost. Rental income might not be enough to cover your mortgage payments and other expenses associated with the property.

  • Occupancy. There might be periods where you'll have to bear the expenses yourself if the property remains unoccupied.

  • Interest rates. An increase in interest rates could result in higher repayments, reducing your disposable income.

  • Inflexibility. Unlike other assets, real estate cannot be easily liquidated for quick access to cash.

  • Depreciation. A decline in property value may leave you with a debt exceeding the property's worth.

  • High entry and exit costs. Costs like stamp duty, legal fees, and real estate agent commissions can be substantial when purchasing or selling property.

Each of these concepts offers unique opportunities and advantages, and the choice between them depends on individual goals, preferences, and the specific context of use.

Key takeaway

While shifts in financial stability can occur for many reasons, it shouldn’t be because of poor retirement planning. Don’t assume that living off your savings in retirement will be enough without having other forms of income to support you.

Finding suitable investments for your retirement can be challenging. However, the right support can make the difference between the future you want and the future you get. If you are ready to start diversifying your sources of income in preparation for your retirement goals, we can help. The key is to start as early as possible.

Get started on the journey to a happy and fulfilling retirement with Findex. Our wealth management experts will work with you to create an investment plan that reflects your goals and provides financial security in your golden years. Don’t risk your future, contact us today to learn more about how we can help with your retirement plan.

Please see Disclaimer and Disclosure information.

Author: Nicolas d'Emden | Partner