5 Unexpected Sources of Retirement Income | Smart Change: Personal Finance


(Selena Maranjian)

Here’s a majority you don’t want to be a part of: Most people don’t have enough savings for retirement. According to the 2022 Retirement Confidence Survey, only 33% of workers have saved $250,000 or more for retirement, meaning 67% haven’t. (In fact, 19% saved less than $1,000.)

If you’re severely behind on your savings and hoping to make ends meet on Social Security income when you retire, you should know that the average monthly Social Security pension recently was just $1,673, or only about $20,000 per year. Of course, you’ll need some other sources of income for retirement. Here are seven, some require some cash to spend and some don’t

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1. interest

This source of income has been almost useless for many years as we have endured a long period of extremely low interest rates. But not anymore – they climbed. If you have $20,000 in your bank account and make say 2% of that, that’s only $400 a year. But if interest rates are higher and you’re earning, say, 7%, that principal can yield $1,400.

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2. A part-time job

Here’s an obvious way to earn more income in retirement: work. You may not necessarily be into it, but a little brainstorming and exploration could yield some attractive part-time or side jobs. As a bonus, they can keep you from feeling bored or aimless and even depressed in retirement. For example, if you work 12 hours a week and make $15 an hour, you can make about $780 a month (more than $9,000 a year) before taxes.

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3. A fixed annuity

If you have a significant chunk of spare change when you approach or retire, you can turn some or all of it into a very reliable income by buying an annuity. In general, fixed annuities are simpler and arguably preferable to variable or indexed annuities, but still research annuities before you buy one. You can get annuities that pay you every month for life, starting now or starting in the future.

Here’s an idea of ​​the kind of income you can potentially buy through an annuity these days:

person/people

Costs

Monthly income

Annual Earnings Equivalent

65 year old man

$100,000

$600

$7,200

65 year old woman

$100,000

$579

$6,948

70 year old man

$100,000

$676

$8,112

70 year old woman

$100,000

$646

$7,752

65 year old couple

$200,000

$1,040

$12,480

70 year old couple

$200,000

$1,139

$13,668

75 year old couple

$200,000

$1,295

$15,540

Source: instantannuities.com.

4. Dividends

Another powerful income-generation strategy is investing in dividend stocks. Similar to annuities, if you allocate a large amount of money to them, you can generate a significant stream of income. Better yet, while you’re exchanging cash for annuity payments with dividend stocks, you keep your money and don’t expire while receiving dividend payments (and ideally, enjoying a share price appreciation, too). But while annuity payments are guaranteed (as long as the annuity provider remains solvent), stocks and their dividends make no long-term promises. However, if you’re focused on healthy and growing dividend payers and you have a $300,000 portfolio with an average total return of 4%, you can expect to make $12,000 per year.

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5. Your home

There are several ways to extract value from your home. Reverse mortgages, for example, can serve some people well (but not all) as they provide a steady income until they no longer need their home, at which time the borrowed money is due.

Alternatively, you could downsize to a smaller, lower-cost home or move to a lower-cost region. This can save you a ton of expenses like property taxes, home insurance, mortgage payments, maintenance, utilities, etc.

Another home-centric way to generate income is by renting out rooms in it — or renting out the entire house — for the short or long term. You can do this through a service such as Airbnb. Also hosting a boarder temporarily can be a great win-win situation if your boarder can help you with various needs as you age, such as: B. when shopping, with housework or just to keep you company.

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These are just a few of the many ways to generate more (or more reliable) income in retirement. A little research on the internet can reveal other possibilities – such as B. Health Savings Accounts (HSAs) or the sale of your life insurance policy. Just make sure you don’t rely solely (or primarily) on Social Security.

The $18,984 Social Security bonus is completely overlooked by most retirees

If you’re like most Americans, you’re several years (or more) behind on your retirement savings. But a handful of little-known “Social Security secrets” could help boost your retirement income. For example: One simple trick could earn you up to $18,984 more…every year! Once you learn how to maximize your Social Security benefits, we believe you can step into the retirement we all seek with peace of mind. Just click here to learn how to learn more about these strategies.

Selena Maranjian has no position in any of the stocks mentioned. The Motley Fool has a position in and recommends Airbnb, Inc. The Motley Fool has a Disclosure Policy.

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