Yahoo Finance Here are 5 ways Americans can boost their retirement income — without having to save or work more
If you’re worried about running out of money in retirement, you’re not alone.
A nationwide study found that more than half of working age Americans (55%) are concerned that they can’t achieve financial security in retirement.
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We all want to enjoy our golden years, but even those who have been saving and investing for years might still be leaving money on the table — and wouldn’t it be nice to have an additional financial cushion to help eliminate the fear that you’ll run out of cash in retirement?
So, rather than frantically saving more or taking on a second job, here are five strategies that could help you get more out of your retirement income.
1. Wait to claim your Social Security benefits
Your Social Security benefit goes up each year you wait to retire past age 62 — which is the earliest you can claim it. It can go up somewhere between 5% and 8%, plus inflation, per year.
Once you hit your full retirement age as defined by the Social Security Administration (age 67, for most people), it can hit 8%, plus inflation, every year until age 70.
If you’d planned to tap into your Social Security as soon as you turned 62 simply because you can, you may want to consider waiting.
If you don’t already have one, mock up a retirement budget to give you an idea of how much you’ll need to live comfortably in your golden years. From there, you can calculate how much you’ll need to supplement your Social Security benefit with other sources of retirement income.
Also keep in mind that Medicare doesn’t kick in until age 65, so if you retire early and have an expensive medical emergency, that could hurt your nest egg.
2. Contribute to your employer-sponsored 401(k)
There’s no free lunch, but an employer-sponsored 401(k) is basically like getting free money. However, only half of American households participate in a 401(k) or defined benefit plan, according to the Federal Reserve’s Survey of Consumer Finances.
Maybe you’re saving and investing… just not in a 401(k). However, if your employer will match your contribution — which is often half of whatever you contribute, up to three percent of your salary — then you’re missing out on free money.
Therefore, it could be worth rethinking your investment strategy.
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3. Do some tax planning
During your working years, consider setting a plan to diversify how and when your retirement savings will be taxed.
This might mean a combination of tax-deferred accounts, such as 401(k)s and traditional IRAs, along with Roth IRAs, brokerage accounts and health savings accounts (HSA), depending on whether you’re in a low, middle or high income tax bracket.
This is where an accountant or financial adviser can help: they can assist in finding tax breaks — not just for now, but for the future. For example, they may help you figure out the best way to do a Roth conversion to avoid paying capital gains.
4. Downsize your home
Downsizing in retirement could mean selling your home and moving into a smaller one, such as a condo or seniors community — it might even mean moving to a more affordable state that doesn’t tax residents’ income.
If you decide to go this route, though, you won’t want to rely on downsizing as a way to fund your retirement years. You may not make as much of a profit as you’d expected, and you’ll need to factor in closing costs, legal fees and other expenses.
However, you’ll benefit in other ways if you choose to downsize, such as lower utility bills, property taxes and maintenance fees.
This means you’ll have more cash on hand for the fun stuff, like golfing, travel, or visiting the grandkids.
If you really don’t want to move out of your home, you could downsize in other ways: perhaps you turn the basement into a rental suite to help generate more income or, if you spend the winters sunning in Florida, rent out your entire home while you’re away.
5. Hold off on retirement
On average, men retire at age 64.7 and women at 62.1, according to 2021 data from the Center for Retirement Research of Boston College. So, another way to boost your income is to wait a bit longer to retire, if you’re able.
Waiting an extra year or two means your retirement savings will continue to benefit from compound growth, you’ll have a higher Social Security benefit and, if you have a 401(k) employer match, you’ll continue to grow your nest egg.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
