10 Ways to Generate Income After You Retire
Financing retirement has become more challenging than ever. But the good news is that we have more sources of income than we might at first realize. Here are ten ways that people generate income after they retire. Most people only need three or four to be financially comfortable.
1. Social Security. The average retiree collects about $1,360 a month from Social Security. But many people spend more than that on housing, health care, transportation and food. While Social Security may be part of the equation for financing retirement, it does not provide the whole answer. Your benefit may differ significantly from the average, based on your earnings history and the age you retire. You can retire and collect Social Security anytime between 62 and 70. The longer you wait, the higher your monthly check.
[See: 10 Ways to Increase Your Social Security Payments.]
2. Retirement accounts. Take stock of how much savings you have stashed away in an IRA or 401(k) retirement plan. Whatever the amount, you can safely withdraw somewhere between 3 and 4 percent per year to support your retirement lifestyle. Typically, you can start withdrawals, without penalty, at age 59 1/2, and for many plans you must start withdrawals by age 70 1/2 or face penalties. Remember, you may have to pay income taxes on money taken from a retirement plan.
3. Other savings. In aggregate, the bulk of individual savings is invested in IRAs and other retirement plans. But you may also have savings outside of a retirement program. Many experts suggest spending down taxable accounts first, and holding off on IRA withdrawals, since retirement accounts continue to grow on a tax-deferred basis.
4. Pensions. Many of us have seen pension plans fall by the wayside. But some retirees from the private sector and most people from the public sector still collect pension payments. If you held a number of jobs in your career, you should check with old employers about any pension rights you may have. It's also a good idea to research how secure your pension is. Most pensions are well protected, but not all pensions are guaranteed.
5. Income from your spouse. My brother-in-law took an early retirement package at age 55, just a couple of years after his wife went back to work after raising their kids for 20 years. A working spouse can provide income for the household and qualify both members of the couple for health insurance.
[Read: A Guide to Getting a Pension.]
6. Inheritance. According to a Natixis Global Asset Management investor survey, 40 percent of baby boomers are expecting some kind of inheritance from their parents or other relative. Considering the vagaries of the economy and the high cost of elder care, you shouldn't count on this as part of your retirement planning. Instead, consider it a bonus if you're lucky enough to have had frugal parents who lived beneath their means.
7. Post-retirement employment. The idea of working after retirement may seem like an oxymoron to some people. But there are plenty of opportunities to supplement your retirement income with fun, low-pressure employment, whether it's taking on occasional assignments from your old employer, working part-time at the mall or the golf course or turning your hobby into a money-making venture.
8. Rents and royalties. Using a rental property to supplement your income may involve renting out your vacation house or investing in a rental condo in your hometown. Either way, you're taking on a responsibility, and many retirees feel the increased income is worth the trouble. A smaller number of retirees continue to enjoy royalties from a book they once published, a song they wrote or an advertisement they appeared in.
[See: 10 Tax Breaks for People Over 50.]
9. The sale of a primary residence or business. A select few can reap the rewards of selling a business they've owned and managed. Most of us own a home, often worth more than what we paid for it and more than it would cost to purchase a downsized retirement home. You may or may not want to use your home to help finance retirement, but it's there as an asset you can use if you need it.
10. Children or other family members. We spent a good portion of our lives and our fortunes supporting our kids when they were growing up. Of course, we don't want to be a burden on our kids as we get older, but don't forget that your children, and sometimes other family members, are often willing to help out financially or in other ways.
Tom Sightings is the author of "You Only Retire Once" and blogs at Sightings at 60.
