Five ways to increase your income in retirement.
Today we are going to be exploring some ideas, five ideas about how to increase your income in retirement, and some of the best strategies for retirees. After working with retirees since July of 2000, there are some standard things, standard ways that they can increase their income during retirement.
This discussion brings me back to a client that I had, and her husband had passed away, and I had sold him life insurance and so she got a big chunk of money, and was living in Georgia and wanted to move to Florida.
We looked at some of the options of what she could buy in Florida and I gave her the exact price range that she could buy. I told her exactly what to do with the money in paying off credit cards, paying off car loans, and then what she should buy the home for, and it really was not well received. She was talking about how she didn't like my ideas. And some of the ideas that I gave her she had had bought this, and she couldn't afford this home that she bought because she had to live in a gated community in Miami because it was safer.
And two of my ideas were rent your place out, get a roommate, or get a job, another job, a second job. She didn't like either one of those ideas. I refused to sell her any of the money trees that I had because I just used the money trees for myself, and she decided just she was going to sit in there and later ended up getting in tremendous financial trouble. She continued to make poor decisions. She was sold a condo by a young guy that she was working with and it really just got her in trouble.
So that's going to bring me to my first way that you can increase your income during retirement and that is to work part-time.
1. Part-Time Work
Working part-time is definitely a way to increase your retirement income. And just like with exercise or dieting, once you start doing it you get used to it and you can begin to even enjoy it. Now especially this is true if you can find a job that you like and enjoy.
So for example, if you really love dogs or animals, if you start working at a veterinarian. That could be fun for you and enjoyable for you to work there part-time. If you are in a situation where your financial planner tells you that you're going to run out of money, you can work with him to figure out exactly how much money you need to make each year and for how long with your part-time job, in order for you not to run out of money and live comfortably during retirement. It is really not that hard. It's just a matter of running the numbers. And there's no real reason to shy away from part-time work if you know that you're going to be putting stress on your financial plan or your retirement plan.
2. Roommate or Rent Out Portion of Home
The next one that I think is another great way to earn additional income or how to increase your income during retirement is to rent out maybe a portion of your home on Airbnb or get a roommate. Airbnb is one of the fastest growing companies in the world as we sit here today in 2022. Over the last 12 months, its revenues grown by roughly 70%. Now part of that has to do with COVID, but part of it also has to do with the popularity of the company.
So if you are retired and you live in a home with a basement that would be perfect to rent that out and give them access to that. You can get a smart lock so you don't have to fool with exchanging keys and all that. And it can be real easy for you to earn a little bit of extra income, maybe $500 extra a month, maybe $1,000 extra a month, maybe even $1,500 to $2,000 extra per month depending on what type, how nice your basement is and where you live.
You can also even rent out an extra room on Airbnb or flat out just get a regular roommate that has a longer-term lease if you want to have the same person there day after day for six months or whatnot. That is another way for any of us to increase our retirement income.
Now some of these ideas sound uncomfortable to people. And they can be.
We all want to have a money tree in our backyard
and live in a palatial mansion with those that we love the most, or by ourselves and our favorite animals. But that kind of stuff only comes true in Disney World for most people.
The rest of the world, and particularly the people in America that are retired, really do have to be smart in retirement, and plan well particularly depending on based on their asset level and how much they're getting for Social Security and how much their expenses are are. So those are ways to increase your retirement income for whatever reasons that you have. Those are two.
Free Retirement Video
But before you read #3, here is a link to our free retirement video that will show you how to avoid running out of money in retirement and potentially increase your retirement income:
3. Wait Until 70 to Start Social Security
The other thing that I will be doing myself. assuming things don't change and that I advise my clients to do is be in good health and wait until 70 to begin taking Social Security. By waiting to take your Social Security at the age of 70 you can increase your payout by as much as 50%. Everyone should be in really good physical health at the age of 62 or there's no reason to start Social Security at the age of 62. You can do other things to produce income if you really need it that badly. Age 70 is much more appropriate. At that time you're going to be eight years older and we will be able to not be in the same health at the age of 62. Unless of course we decide to start eating better and exercising for the first time in our life at age 65.
So your increase will be a whole lot higher if you can just wait those eight extra years, be patient. Do part-time work, save more, do whatever it is you need to do. Most importantly,
focus on your health so that when you turn 70, you can enjoy this new and increased amount of Social Security income benefit.
Taking Social Security at age 62 just the moment that you turn 62 is not necessarily the wisest or best way to approach things. Particularly if your plan is to live to be 90 or 85 and you want to be in good health, and you are in good health and you are in good shape, and you eat a lot of vegetables and drink a lot of water, and do a good amount of cardio and stretching. There's just no reason to start it at age 62 unless you're not as prepared as you should be, or you don't have the patience to continue to work or do what you need to do to make it to 70.
4. Maintain a truly diversified portfolio
The next one is to invest your money into a truly diversified portfolio rather than in just bonds or annuities. Bonds, as of this writing which is January 2022, are close to an all-time high. We haven't seen bond interest rates really high since the early '80s. Since the early '80s, bond interest rates have creeped down for about 40 years in general, almost 40 consecutive years. It's been an amazing bull market for bonds and the interest that they're paying, which means annuities are also paying very, very low rates. Rates that can be as low as 1% on CDs, bonds, and annuities depending on their timeframe and depending how safe the bond is or how safe the annuity is.
CDs of course will offer extremely low rates, and so will treasury bonds and bills depending on their time horizon. But even a 30-year treasury bond at this point is going to be less than 3%.
So if we put together a diversified portfolio that has non-correlated asset classes like gold, long-term treasuries, and global stocks, then what we can have happen is we don't have to worry about the big huge downs of the market.
If the global stock market drops 50% ,that's okay because U.S. treasuries and gold will be break even or up most likely. That's what we've seen historically. And by doing that, you have a much smoother ride. You have much more confidence that you can go ahead and take some risk with your money, because the risk is lowered through your diversification in non-correlated asset classes.
The idea of investing in non-correlated asset classes is to protect you greatly during these huge drops that the stock market and other types of asset classes go through. You really want to protect yourself from that, and that's what the diversification will do. That is why I call it true diversification is because you are really getting into asset classes that are not related to each other in the way that they perform.
So when you put yourself together a nice portfolio of non-correlated asset classes, you can raise the amount that you're able to withdraw from your portfolio up to 5, maybe even 6% or even 7%. If the portfolio is averaging 6% a year, and you withdraw 7, that means you're only drawn down your portfolio 1% a year. And a non-correlated asset portfolio gives you a much, much smoother return than anything you could get in an inflationary asset class by itself like stocks, gold, or commodities, or even real estate.
5. Buy Rental Property
The final way that we want to talk about increasing your income is you can buy a rental property. If you have a million dollars and it's not producing the income that you want, you can always take 300,000 or $400,000 of it, invest in some sort of rental property and begin getting income from it much more than you would get if you just took it and put into stocks and got dividends, or put it into bonds and received interest.
Dividends and interest are at very low historic rates and rental income is at a higher rate historically even than what it has been typically compared to home prices. So if you were to buy a home and rent it out; you could get really increase your income.
One good idea is to furnish the home. Paint it and furnish it, and you can get a lot more return on that furniture that you bought by simply furnishing it rather than trying to rent out an empty home or condo or apartment.
Free Call with Tommy
If you would like to set up a free no-cost no-obligation call to discuss how you can increase your retirement income with some other more advanced ideas in addition to the ones we've listed here, click on the link here and we'll have a discussion for 20 minutes. And talk about where you are now, where you want to be, and some of the ideas that I also use with my clients to help them increase their retirement income.