If your financial status is typical, you may be nearing retirement with significantly less money than you require. This will result in significantly less money than you require. Consider, for example, that 34% of working-age respondents reported the entire value of their savings and assets, excluding the value of their primary property, is less than $25,000. Worse, almost one in every five adults had less than $1,000 saved.
Yet everything is not lost. There are several ways you might position yourself to obtain additional income in retirement, many of which you may not have considered. Here are a couple such instances.
Expected sources of retirement income in 2023
There are several common sources of retirement income.
Social Security: The average monthly retirement benefit at the time of this writing is $1,677, or approximately $20,000 annually.
Dividends: Even a modest overall yield of, say, 3% can generate $12,000 annually from a $400,000 portfolio.
Stocks: Many retirees shave off and sell stocks from their portfolios each year for income.
Interest: When interest rates are relatively or very high, retirees can enjoy income from that, without touching their principal.
A job: You might not want a part-time job in sources of retirement income, but it can generate valuable income.
Unexpected sources of retirement income in 2023
Here are some more out-of-the-box options to consider:
Renting Out Space in Your Home
Your house provides several opportunities to produce revenue. You might, for example, use a site like Airbnb to rent out part or all of your property for a short period of time. If your home is large enough, you might even take in a boarder for one or more years.
Then there’s the prospect of a reverse mortgage, in which a lender provides regular income through a loan secured by your house. Reverse mortgages aren’t for everyone because they leave less to your heirs, but they can be a terrific option for certain people.
You may be able to rent out space in your house – or your entire home – using businesses such as Airbnb and Expedia Group’s VRBO for short or lengthy periods of time. Lots will happen.
Relocating sources of retirement income
You may not want to relocate, but moving to a less expensive place might result in you spending much less and keeping more money in your pocket. Therefore you may just downsize to a smaller property in the same neighbourhood. Taxes, insurance, utilities, and upkeep, for example, are likely to be lower.
Interest rates have been quite low for many years – until lately – so many individuals may not have considered earning money through interest. But, as long as interest rates stay considerable (and there is a chance that they will continue to rise for some time), establishing income streams from interest is worth considering.
Some banks, for example, pay more than 4% for one-year certificates of deposit (CDs), and I just saw a 4.75% two-year rate. If you invest $20,000 and earn 4.5% on it, you’ll earn $900 in interest over the course of the year.
Paying off debts sources of retirement income
When interest rates are quite high, many people find themselves paying substantially more in debt repayments – such as for credit card accounts – than they did previously. For example, average current credit card account rates recently exceeded 19%, while new account offers averaged over 22%. That’s a lot of interest to pay, so if you have any high-interest debt, paying it off will allow you to retain more money in your pocket.
If you owe $25,000 and the interest rate is 20% per year, you’ll pay $5,000 in interest alone per year. After you pay off your loan, you keep the $5,000.
Pay a big sum of money to an insurer, and you may get monthly payments for the remainder of your life, as well as the life of your spouse. Pay more, and your checks may be adjusted for inflation. Fixed annuities are often the easiest and least complicated annuities to consider.
Dividends sources of retirement income in 2023
Dividends aren’t a hidden source of retirement income, but they’re commonly overlooked by retirees and near-retirees. Consider this: If you have a $400,000 stock portfolio with a 3% average dividend return, you’ve set yourself up to earn $12,000 in cash each year from your stocks without having to sell a single share. It works up to $1,000 every month.
Also, good and rising dividend-paying equities tend to raise their dividends on a regular basis, so you may be collecting $1,200 per month or more in a few years. Dividends might assist you in keeping up with inflation.
A reverse mortgage
A reverse mortgage is a loan in which a lender promises to pay you a lump sum or regular payments as long as you live in your house—and your property serves as security. A reverse loan is not for everyone, and it is not the greatest option for everyone, but it may be quite beneficial to certain people. (For example, it frequently implies that your heirs will have to sell your home to pay off the debt.)
Owning rental properties may be more than you want to take on, but it may be a terrific source of retirement income for those with specific dispositions and circumstances. It will, however, necessitate some care, and there may be drawbacks, such as homes sitting unoccupied for an extended period of time or difficult renters. And your gains will arrive only after you have paid your mortgage, taxes, insurance, and maintenance.
Part time job for sources of retirement income in 2023
You may not have imagined yourself working in sources of retirement income, and it may seem like a dreadful notion to you, but give it some thought. Many retirees become bored and restless without the discipline of work obligations, so a part-time job on the side may assist bring in additional money while also providing opportunities to socialise. You may also become a bit creative, devising methods to generate money doing things you like, such as pet sitting, manufacturing and selling crafts, teaching music or a foreign language, or offering freelance services like writing, editing, or web design.
More internet research or thinking outside the box might lead to new sources of income. Whatever you do, don’t count on relying heavily on Social Security, as it’s likely to deliver far less than you need. The average monthly sources of retirement income benefit was recently just $1,828 — or about $22,000 on an annual basis.
Original Article: Sources of Retirement Income