6 Unexpected sources of retirement income | Smart Change: Personal Finance

(Selena Maranjian)

Before retiring, you should have built up enough streams of income to support yourself for many years. After all, if you retire at, say, 65, you may have 30 or more years of retirement ahead of you. You fail to prepare and you may run out of funds before you run out of breath.

Fortunately, it is not too late to increase the income you collect in retirement, even if you are already retired. Here are six sources of income to consider.

Image source: Getty Images.

1. Your home

For starters, consider a reverse mortgage, through which you borrow money using your home as collateral and typically receive a monthly income stream. Better yet, payments are likely to be tax free too.

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That income can be a lifesaver in retirement, although it may often not be as much as you hoped for. The loan typically won’t have to be repaid until you no longer live in your home, such as when you die or move to a retirement home or nursing facility. At that point, many borrowers choose (or must) sell the home to pay off the loan. If a reverse mortgage appeals to you, be sure to do more research on the pros and cons.

2. Your home (again)

There are other ways to profit from your home, for example by renting a space inside it. You could do this on a temporary and short-term basis via a service such as Airbnb or VRBO, allowing people to live in part or all of your home for a night or a week or two at a time.

For even more income, you may be able to accommodate a boarder for a year or more. This can actually be a great deal for some seniors, if you have one or more younger people living with you who can help out around the house.

3. A different house

A third home-related way to generate more income – or simply spend less in retirement – is relocation. You could move to a city or region with a lower cost of living, or you could stay in your current area but move to a smaller home. Either way, you may end up spending a lot less on property taxes, insurance, utilities, maintenance, and repairs. In a low-cost region, you may be spending less on food, health care, and other expenses as well.

4. Rent amazing things

In addition to renting space in your home (or the whole house), you may be able to generate retirement income by renting other things. There are online services, for example, that allow people to rent another person’s car, garage, swimming pool, boat, camping equipment, recreational vehicle, garden, bicycle, and more. Depending on what you have to offer, you may be able to generate useful income from things you use little.

5. Pay off debts

Paying off debts, especially those with high interest rates like credit card debt, is a powerful strategy that won’t generate new income, but it can help you keep a lot of money from leaving your pocket. If you owe $ 25,000 and are charged a 20% interest rate, you will shell out about $ 5,000 per year just for interest. Once that debt is paid off, that $ 5,000 stays with you instead of going to the credit card lender. Likewise, paying off your mortgage before you retire can free up many mortgage payments that you won’t have to pay.

6. Dividends

Finally, here’s a classic way to generate retirement income: dividend-paying stocks. They are great for retirees and near-retirees, but they can serve surprisingly well to all investors. Imagine, for example, that you have a portfolio of stocks worth $ 400,000 with an overall dividend yield of 3%. This should provide $ 12,000 in annual income, and that income is also expected to increase over time as businesses increase their payments.

Retirees can use that money – about $ 1,000 a month, on average – for a living, but those far from retirement can use that money to reinvest in stock. This can be especially useful when you are having trouble generating funds to invest.

For a little inspiration, here are some family businesses and their recent returns:

Agency

Recent dividend yield

Verizon Communications

5.8%

IBM

5.2%

Walgreens Boots Alliance

5%

3M

4.4%

Real estate income

4.2%

AbbVie

3.8%

Pfizer

3.1%

Coke

2.9%

Procter and gambling

2.6%

Nucor

1.7%

Nike

1.1%

Data source: Yahoo! Finance.

Don’t ignore the lower yields until you check how fast they’ve grown – a $ 1 dividend today could be $ 2 in a few years if it increases rapidly.

These are just a few of the many ways you could generate valuable retirement income. A little online digging can reveal more ways. You tend to this problem and your retirement could end up much safer and more fun.

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Selena Maranjian has positions in AbbVie, Procter & Gamble and Realty Income. The Motley Fool has locations and recommends Airbnb, Inc. and Nike. The Motley Fool recommends 3M and Verizon Communications and recommends the following options: Long January 2024 $ 47.50 Call Coca-Cola. The Motley Fool has a disclosure policy.

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