5 Unexpected sources of retirement income

(Selena Maranjian)

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

If you are far behind in your savings and are hoping to get away with retirement on Social Security income, know that the average monthly Social Security retirement benefit has recently been just $ 1,673, or only about $ 20,000 per year. Clearly, you will need other sources of retirement income. Here are seven, some that require a little bit of money to spend and some that don’t

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1. Interest

This source of income has been almost useless for many years, as we have gone through a long period with extremely low interest rates. Not anymore, though: they are climbing. If you have $ 20,000 in the bank and you earn, say, 2% on it, that’s only $ 400 a year. But when interest rates are higher and you earn, say, 7%, that capital can deliver $ 1,400.

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2. A part-time job

Here’s an obvious way to generate more income in retirement: work. You may not be anxious to do this, but a little brainstorming and exploration could lead to some interesting part-time jobs or side gigs. As a bonus, they can keep you from getting bored or feeling aimless and even depressed in retirement. If you work, say, 12 hours a week and make $ 15 an hour, you can raise about $ 780 a month (more than $ 9,000 a year), before tax.

3. A fixed annuity

If you have a significant change as you approach or retire, you could convert some or all of it into a very reliable income by purchasing an annuity. In general, fixed annuities are simpler and probably preferable to variable or indexed annuities, but still read annuities before buying one. You can get annuities that start paying you every month for life, starting now or starting in the future.

Here is an idea of ​​the type of income you may be able to purchase through an annuity these days:

Person / People

cost

Monthly wage

Equivalent to annual income

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: immediateannuities.com.

4. Dividends

Another powerful income-generating strategy is investing in dividend-paying stocks. Just like with annuities, if you give them a large chunk of money, you can receive a significant income stream. Even better, as you trade a sum of money for annuity payments, for dividend-paying stocks, you keep your money and don’t lose it, while you receive dividend payments (and, ideally, enjoy the appreciation of the stock price as well) . But while annuity payments are guaranteed (as long as the annuity provider remains solvent), stocks and their dividends make no long-term promise. However, if you focus on healthy, growing dividend payers and have a $ 300,000 portfolio with an overall average return of 4%, you can expect $ 12,000 per year.

5. Your home

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

Alternatively, you could downsize to a smaller, less expensive home or move to a less expensive region. This way you can save a lot on expenses like property taxes, home insurance, mortgage payments, maintenance, utilities, etc.

Another home-focused way to generate income is to rent space in it – or rent the entire home – for the short or long term. You could do this through a service like Airbnb. Welcoming a boarder for a while can also be a great win-win situation if your boarder can help you with various needs as you age, such as grocery shopping, housework, or just keeping you company.

These are just a few of the many possible ways to generate a more (or more reliable) income in retirement. A little research online can reveal other possibilities, such as health savings accounts (HSAs) or the sale of your life insurance policy. Just make sure you don’t rely only (or mostly) on Social Security.

The $ 18,984 Social Security Bonus that most retirees completely overlook

If you’re like most Americans, you’re a few years (or more) behind on your retirement savings. But a handful of little-known “social security secrets” could help ensure a rise in your retirement income. For example: a simple trick could make you pay up to $ 18,984 more … every year! Once you learn how to maximize your Social Security benefits, we think you could safely retire with the peace of mind we all seek. Just click here to find out how to learn more about these strategies.

Selena Maranjian has no position in any of the titles mentioned. The Motley Fool has locations and recommends Airbnb, Inc. The Motley Fool has a disclosure policy.

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