Learn something new every day
More Info... by email
A monthly income plan is a form of investing that has the goal of providing a consistent cash payment to the investor on a monthly basis. Plans of this type provide the investor with a steady stream of income that can be used to manage the household budget, or otherwise provide some type of financial stability. It is not unusual for a monthly income plan to be used as part of as retirement planning strategy, such as a pension plan or some other arrangement that provides benefits in perpetuity.
While the particulars of a monthly income plan may vary, the most common approach is to purchase investments that generate income that is deposited into a central account. Upon reaching retirement age, the investor begins to receive a monthly disbursement from that account. In the meantime, the investments that generate revenue continue to do so, thus allowing the account balance to constantly replenish. Since the amount of the monthly payment is set, the risk of draining the account through over-spending is kept to a minimum.
When structured carefully, a monthly income plan can serve as the main source of income during the retirement years, or serve as an additional source of income that helps to augment payments made from a pension plan or some type of government operated retirement initiative. The idea is to make sure that the flow of income each month is sufficient to allow the recipient to maintain an equitable standard of living. Thus, the plan makes it possible to cover such essentials as food, clothing, and shelter, and possibly also allow the recipient to have money for extras such as taking trips, or any other type of recreational activity that is desired.
There are a number of financial institutions that offer help in establishing and maintaining monthly income plans. With a basic plan, the investor deposits funds with the institution, which in turn invests the funds on behalf of the investor. As earnings are generated, they are placed into the account, allowing the balance to incrementally grow over the years. Once the account holder reaches retirement age, it is possible to set a specific figure for the monthly disbursement from the account. Assuming that the investment activity went well over the years, and the selected investments are still generating revenue, the monthly income plan is highly likely to remain solvent for the remainder of the account holder’s life, thus providing a degree of financial security that makes the retirement years much more enjoyable.
One of our editors will review your suggestion and make changes if warranted. Note that depending on the number of suggestions we receive, this can take anywhere from a few hours to a few days. Thank you for helping to improve wiseGEEK!