When it comes to retiring in your later years, having a source of income is impertinent as it will completely replace your salary. Unless you are able to live an extremely frugal lifestyle, any type of old age security benefits or pension will not be enough to cover your living expenses. By arranging one or (preferably) more of the following potential sources of retirement income, you will be able to enjoy a well-funded and relatively safe retirement. Unfortunately, identifying and knowing which options are best for you will require extensive research on your part, however, we aim to make this a little bit easier. In this article, we will take a look at potential sources of income and a few tips on how to use them properly.
- Claim Social Security Benefits But After Seventy: this is almost always the first option that individuals think of as it is a government system that provides monetary assistance to those who do not have adequate income or no income. In the United States, it provides benefits to those who are retired, unemployed or disabled. When it comes to claiming social security benefits, those who are able to wait until the age of seventy are able to gain more monetary assistance than those who take it early at sixty-five.
- Use Reverse Mortgages or Downsize Your Home: utilizing the equity in your home is another popular way to meet retirement expenses. You can either take a reverse mortgage which allows you to continue living in your home for the rest of your life while receiving payments every month or a line of credit. You may also want to sell your home and downsize to a smaller home so that you have money from the sale of the house to go towards your retirement.
- Use a 401(k) or Similar Options: contributing to a 401(k) or similar is one major way of saving money for retirement. Generally speaking, you obtain one of these types of accounts through the company you are working for and are able to contribute up to a certain amount per year. The amount you can contribute will be determined by your age, with those over fifty being able to add more money per year than someone under the age of fifty. By placing savings into a 401(k) not only do you get some tax benefits, but your employer will also match a certain percentage.
- OptInto Annuities: a lot of individuals choose to opt into deferred annuities as it is akin to buying a pension of sorts. It involves handing over a chunk of money to a financial institution or insurance company and in return, you receive payments. These come in a variety of options and types that pay out in different amounts. It is important that if you are considering this option, you seek financial advice from an advisor that does not sell annuities to ensure that there is no conflict of interest when you go to buy some.
- Get a Pension from an Employer: for most career paths, permitting you have worked for your employer long enough to invest into the company’s pension scheme (typically after 5 years), you will be able to claim pension benefits. The longer you work for the employer, the greater your pension benefits will be.
- Invest Into Stocks: if you have the mind for tackling investment options and are willing to watch and wait for them to grow in value over the years, then this is a decent option. However, it is important to note that not all stocks will go up in value and so it takes quite a bit of time and effort to keep your eye on the prices of each stock and sell off the ones that are underperforming.
- Become an Entrepreneur or Own a Business: just because you have retired doesn’t mean that you do not have skills that are valuable and useful to businesses and the general population. Setting up your own business can be a great way to utilize those skills and your experience, while not having to retain a “job” throughout the day. Most retirees often choose to create a small business within the industry they have the most experience or skill set in.
- Consider Renting Out to Bring in Money: another great option, especially if you choose to not downsize your home, is to rent out a portion of it. The income that you get from this can either be used to pay down your mortgage faster or put away into savings for retirement. Other than this, you can always become the owner or part owner of a piece of real estate. There are two ways to go about this, either use the hands-off approach where you have a property management company do the day-to-day maintenance and running of the property or manage it yourself. If you choose to go with a property management company, this will cut into your profits but if you manage it yourself, it requires a significant investment in both time and effort. The only downside to rental properties is that because they are such a large investment, they cut into your ability to diversify across the market and they can cause cash flow problems if you are managing the property on your own without a real estate partnership with other investors.
- Delay Retirement and OptInto Part-Time Work: even if you choose to retire, you may want to consider getting a part-time job or a side job that gives you some extra income. Not only will it give you something to do on a daily basis but it will bring in extra income and provide you with psychological benefits, permitting you enjoy and find the job fulfilling.
Regardless of whether you opt into regular part-time work, create your own small business, or choose to invest in property and stocks, you will need to make a plan that pulls income from multiple sources. The reason for this is anything can become insecure at any time, a property may burn down in a fire and a specific stock may plummet on the market, so having multiple sources of retirement income ensures that your retirement is safe.