What is Current Income?

Patrick Roland

Retirees frequently are on fixed budgets that are based on their investments and retirement funds. The money off of which retirees live is known as current income, which consists of two distinct parts: a current income portfolio and a current income fund. Both parts are important to the livelihood of retirees in different ways.

Current income is a measurement of money that a retiree receives from a variety of sources.
Current income is a measurement of money that a retiree receives from a variety of sources.

Current income is a measurement of money that a retiree receives from a variety of sources. This often is segmented in order to budget out the coming months and years and to ensure a livable income. All estimates are apt to fluctuate, because numbers usually are based on current prices and future projections, and the values of most investments rise and fall with the market.

The "current income portfolio" is a term used to define all of the holdings that make up incoming money. In many cases, the actual spending money, also called the fund, is comprised of interest from various dividends. Portfolios differ greatly from individual to individual, but most tend to be conservatively invested and comprised of blue chips stocks, mutual funds and annuities. Each component of the portfolio serves a different purpose in the retirement.

Mutual funds are a key piece of any current income portfolio. Investing in mutual funds means supplying money to a broker who has many other investors giving him or her money in order to invest the funds collectively and pay out the proceeds individually. Bonds are a common form of mutual fund and are issued by governments and businesses seeking financing for specific projects. Dividend funds are another type that has the broker buy safe stocks and pay out the interest to investors.

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Owning dividend stocks as part of a current income portfolio is another common way to ensure income. This operates just like a mutual fund, except the investor purchases and manages the stocks himself or herself. Many prefer this because of the control it provides and the fewer channels that income has to travel through to return to the investor.

Current income also comes from annuities. This is considered one of the safest investments because income is sent on a monthly basis. An annuity is a product sold by an insurance company for investment purposes. This is mixed with the previously mentioned methods and many others in order to create an individual's current income.

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