How to Use the Summer Months to Build a Stronger Retirement Income Strategy

The stock market's trading activity usually slows down during the summer. Many investors "sell in May and go away," and the Fed enters a "blackout period" (from July to September) during which its officials can't publicly comment on the U.S. economy.

But if you're already retired or on the verge of retiring, it's smart to adjust your portfolio during those sleepy months to maximize your retirement income. Here are three simple moves you can make before the weather cools down again and the market wakes up again.

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1. Buy more defensive blue chip dividend stocks

If you own a lot of high-growth stocks like Nvidia (NASDAQ: NVDA), which has rallied 16,510% over the past ten years, it's smart to take some off that money off the table and reinvest that cash into reliable blue chip dividend stocks like Coca-Cola (NYSE: KO).

Coca-Cola and its fellow Dividend Kings have raised their dividends annually for more than 50 years, even as the U.S. economy weathered wars, wild interest rate swings, and recessions. Therefore, shifting some cash into those evergreen stocks before the market pulls back could boost your retirement income and help you sleep better at night.

2. Buy more fixed-income investments

When you retire, your goal should be to keep pace with inflation rather than consistently beating the market. With the Fed's benchmark rate still holding steady at 3.50%-3.75% and poised to increase if inflation doesn't cool off, it could be a great time to buy more CDs, T-bills, and investment-grade bonds to generate stable, low-risk income as the broader market fluctuates.

Municipal bonds, which are exempt from Federal taxes and state taxes (if you live in the issuing state or a state with no income taxes), are also a great option for retirees who want to generate passive income without increasing their tax burden.

3. See how much passive income you actually need

Lastly, retirees should consider whether they actually need to collect Social Security benefits or withdraw funds from their retirement accounts to supplement their passive income. While you can start claiming your Social Security benefits at the age of 62, your annual payments will be permanently reduced by 30%. You can only claim the full payments if you start claiming them at the Full Retirement Age (FRA) of 67.

You can only start withdrawing from your IRAs and other retirement accounts after the age of 59 1/2 without incurring the IRS' 10% penalty for early withdraws on tax-deferred accounts. Therefore, if you already have plenty of liquidity and passive income, there's no need to prematurely touch those locked-up funds.

Leo Sun has positions in Coca-Cola. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.