20 Retirement Income Strategies To Help You Stretch Your Dollar
Are You Ready For Retirement?
Retirement is both an exciting and scary time. The idea of not having a paycheck after decades of working, earning a steady stream of income, is stressful for many people, especially in this economy. Luckily, there are many systems put in place to take some of that anxiety away and ensure you outlive your assets. After so many years building yourself professionally, you deserve a break. Are you doing all you can to make sure your money is working for you? Here are 20 retirement income strategies to help you retire comfortably.
1. Delay Taking Social Security Benefits
Delay taking social security benefits for as long as possible so you can get a larger monthly payout and increase your retirement income. For every year you hold off claiming them after you retire, your monthly benefit rises 8 percent.
2. Diversify Your Investments
Spreading your investments between both stocks and bonds helps mitigate risk and increase your growth potential. When your investments are spread out across different assets, they're less likely to fall due to one bad event.
3. Don't Touch Those Retirement Savings
It's a bad habit to dip into your retirement savings too much. To avoid doing this, create an allocation of assets for regular distributions.
4. Create a Retirement Budget
For someone who's used to having an income, not having any money coming in from a paycheck anymore can be scary. This is where number crunching, creating a budget, and sticking to it come in. Although it's not fun, you'll be much less stressed out with the peace of mind that you have enough to live on.
5. Consider an Annuity
Annuities are a great way to receive a steady stream of guaranteed income after retirement. How it works is you pay a lump sum upfront, usually to an insurance company, and they give you regular income payments.
6. Downsize
When the kids are moved away, it can be hard to justify living in a large house anymore. Plenty of retired people opt to downsize, simplifying their lives and decreasing their living expenses.
7. Cut Your Expenses
When you no longer have an income from your job, you will likely need to change your spending habits. There are many ways to do this, including downsizing, shopping around for lower-cost services, and creating a retirement paycheck (allotting yourself a certain amount you can spend each month).
8. Bucket Your Assets
Bucketing assets just means organizing your money and investments into different categories. Having short, medium, and long-term buckets helps to ensure you'll have enough money at each of those stages.
9. Focus on Dividend-Paying Stocks
Dividend-paying stocks offer more financial stability and consistent income, making them a prime choice for retirees. They're also taxed at lower rates, making them a tax-efficient way to generate retirement income.
10. Find Ways to Generate Income
The last thing you want to do after you finally retire is to go back to work. Luckily, there are other ways to generate income after retirement. You can rent out a room in your house or buy an investment property, invest in dividend stocks and bonds, or make your hobby into a business.
11. Take Advantage of Senior Discounts
Senior discounts are the perfect reason to start embracing your age. You'll be surprised at how much money you can save at cinemas, museums, national parks, and clothing stores.
12. Regularly Reassess Your Plan
You may have created the perfect budget at the beginning of retirement, but that's not where the work stops. You'll need to regularly reassess as prices and plans change over time. Adjust your budget throughout retirement.
13. Make Catch-Up Contributions
A catch-up contribution is an additional amount that people over 50 can contribute to their retirement savings accounts, beyond the annual limit. They're designed to help you build a more substantial retirement nest egg, as contributions to retirement savings are tax-deferred.
14. Use HSAs
The purpose of an HSA, or health savings account, is to help you save money for medical expenses like doctor visits, prescriptions, and dental care, but you can use HSA funds for non-medical expenses when you reach the age of 65. Contributions and withdrawals you make to this account are tax-free.
15. Track Your Spending
Tracking your spending is always important, but it's even more crucial after retirement because you're no longer earning a paycheck. Although it's an annoying task, it will help you reduce your stress and outlive your money. There are many banking apps that can help you do this automatically, so it's less of a "job."
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16. Consider an Income Replacement Fund
An income replacement fund is your way of paying yourself a monthly paycheck. How it works is you invest a lump sum, and the fund pays you from your own money at regular intervals. The idea is to give yourself a steady cash flow and curb your spending.
17. Use Home Equity
Home equity is the difference between what your home is worth and how much you still owe on your mortgage. If you're of retirement age, you can reverse mortgage your house to convert this equity into cash. For some people, it's a huge asset that's worth taking advantage of.
18. Reduce Insurance Costs
Insurance can eat up a huge portion of your budget. Avoid overspending on it by continuously shopping around for the best deals, dropping extras you're not using, paying annually, and asking for discounts.
19. Take Advantage of Senior Tax Breaks
There are all kinds of extra tax deductions available for seniors. Most of them get automatically applied if you correctly indicate your age, but make sure you're getting them all by working with a tax advisor or doing thorough research. Property tax relief for seniors and extra standard deductions are just some of them.
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20. Use A Roth Conversion Ladder
A Roth conversion ladder helps you save money gradually by converting it from a traditional savings account into a Roth IRA through a series of annual conversions. How it works is you convert a portion of your savings into a Roth IRA and then wait five years before you can withdraw without the 10 percent withdrawal penalty. The idea is to minimize the amount you get taxed and have access to retirement funds early without penalties.
