So you’ve finally reached retirement. Ideally, you’ve invested aggressively throughout your working life and now have plenty of money to live the good life — but unfortunately, most retirees don’t live in an ideal world. In fact, many struggle with too little income and spend their golden years worried that they’ll run out of money.
Once you’ve left the workforce, if you’re finding it difficult to thrive on the money provided by Social Security, your pension, and your investments, you have many options for bringing in extra income.
Here are seven steps you can take — even after retiring — to boost the amount of money you have coming in.
1. Move to a lower-tax state
Some seniors’ Social Security benefits are subject to taxation, not just by the federal government, but also by state governments. There are 13 states that tax Social Security benefits, and if you live in one of them, some of your precious retirement income could be going into the state government’s coffers.
Taxes on Social Security benefits aren’t the only concern — or even the biggest concern — for many seniors. Seniors in high-tax states end up paying significantly more in property taxes, sales taxes, income taxes, and other local taxes than seniors in states with more favorable tax policies.
2. Change your Social Security claiming strategy
Delaying Social Security benefits as long as possible — i.e, until age 70 — means you’ll receive larger benefit checks for the rest of your life. Meanwhile, claiming early means a big reduction in benefits. It’s critical to know how your benefit will change based on when you file.
If you’ve already claimed Social Security benefits but want to try to get more income, it may not be too late to get a Social Security do-over. If you claimed benefits less than a year ago, you could rescind your claim, return your benefits, and wait to claim until later, when your benefit will be higher. And if you’re past full retirement age but not yet 70, you can suspend your benefits and earn delayed-retirement credits, which will increase your income when you eventually claim benefits again. However, note that while you suspend your benefits, no one else — including your spouse — can claim benefits based on your record, nor can you receive benefits (such as spousal benefits) on another person’s record.
Both of these options mean waiting longer for benefits, but the increase in your Social Security checks will be permanent, and that’s valuable insurance against running out of money late in retirement. You should do the math to understand the impact of delaying Social Security benefits, but if your goal is a larger source of steady, guaranteed income, then this option can have a big payoff.
3. Slash your investment expenses
If you’re paying high fees for investing, then you’re fattening the accounts of money managers while putting your own retirement at risk. Dumping costly mutual funds for low-cost exchange-traded funds (ETFs) could produce big savings and help you increase the amount of money you can safely withdraw from your nest egg.
If you could drop the fees you’re paying by 1% per year while maintaining the same investment performance, you could save yourself surprisingly large sums of money and make your savings last several years longer.
Fortunately, there are tons of great ETFs seniors can consider, including the Vanguard Dividend Appreciation ETF (NYSEMKT: VIG), which invests in dividend aristocrats with a proven track record of performing and which has an expense ratio of just 0.08%; iShares Core S&P 500 (NYSEMKT: IVV), which has a 0.05% expense ratio and tracks the S&P 500; and the Vanguard REIT ETF (NYSEMKT: VNQ), which has a 0.12% expense ratio and invests in stocks issued by real estate investment trusts (REITS).
4. Change your investment strategy
Speaking of investments, you need the right investment strategy once you’re retired if you want to maximize your income.
While you need to move some of your portfolio out of stocks — as you have less time to recover from market downturns — investing too conservatively could make it impossible for your portfolio to generate enough money to sustain your lifestyle. This is an especially big risk thanks to low yields on bonds and longer life expectancies — after all, the longer we live, the longer our money needs to last.
To determine how much of your portfolio to keep in stocks as a senior, one option is to subtract your age from 110, invest the resulting percentage in stocks, and put the rest in bonds and other fixed-income investments. That way, your portfolio will gradually shift toward more conservative assets as you age. If you have a relatively high tolerance for risk and you want your portfolio to generate more wealth, you could change the formula to 120 minus your age.
You can also take this quiz to determine your ideal asset allocation. Once you’ve determined what’s right for you, be sure to rebalance your portfolio on a regular basis — perhaps once a year or when your asset allocation is more than 1% out of whack.
If you’re not sure where to start, a qualified fee-only financial advisor could give you unbiased advice on choosing an investment strategy that maximizes your retirement income.
5. Tap into your home equity
Home equity is a major untapped source of income for seniors. In fact, there’s so much equity tied up in homes in the U.S. that if it were monetized, median incomes would increase by more than one-third, according to the Center for Retirement Research at Boston College.
Tapping into equity may come with risks depending on which method you choose. A reverse mortgage is one option for using home equity to increase your income — but you’d need to shop carefully for a loan with favorable terms, and you’d lose the chance to leave your home to loved ones.
You could also consider downsizing to a smaller home. The sale of your larger house could free up some cash to invest, while living in a smaller residence could also lower ongoing expenses, effectively providing extra retirement income.
6. Cut your transportation costs
Want to increase your income by hundreds of dollars each month? Just do one simple thing: Get rid of one of your vehicles. AAA estimated the annual cost of owning a new car at $8,469 per year in 2017. Now that you’re retired, could you and your spouse perhaps get by with one car — or no cars — by sharing a vehicle or moving to a place that’s walkable and renting a car only when you need it?
If you both need cars, you could still cut your costs — and effectively increase your income — by switching to a reliable used model instead of regularly buying new vehicles. An older model will cost less to buy and less to insure, but just make sure it still has the safety features you need.
7. Consider part-time work or consulting
Finally, the most obvious way to increase your retirement income is to actually earn more income.
Consider asking previous employers if you could work part-time. Or look for new opportunities to use your professional expertise, like consulting or teaching a course as an adjunct professor at a local college.
Driving for Uber, walking dogs, babysitting, or a host of other activities could also provide low-stress ways to bring in income if you don’t want to get a job in the field you left.
Keep your options open
If you haven’t yet left the workforce and you don’t want to worry about money as a senior, investing as aggressively as possible and working until you have sufficient savings can spare you a lot of stress.
But there are definitely options to boost your retirement income — and to live comfortably on less — if you’re willing to be a little creative. Just keep exploring your opportunities to find a solution that works for you so you won’t have to live out your golden years facing big financial struggles.
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