Many seniors worry about not having enough money in retirement. In fact, in a recent study by Allianz, 60% of older Americans admitted to being more afraid of running out of money in retirement than dying. If you're worried that your savings and Social Security benefits won't be enough to cover your living costs or buy you the retirement lifestyle you're hoping for, here are four ways to give your income a boost.
1. Maximize your Social Security benefits
Anyone eligible for Social Security can start claiming as early as age 62, but taking benefits before you reach your full retirement age (which, if you were born in 1943 or later, is 66, 67, or somewhere in between) will reduce the amount you receive each month. Specifically, your benefits will take a 6.67% hit for the first three years you claim early and then a 5% hit for each year thereafter. So if your full retirement age is 66 and you first take benefits at 62, you'll lower your payments by 25%.
On the other hand, if you hold off on Social Security when you reach your full retirement age, you'll get an 8% boost in benefits for every year you don't claim. Though this incentive runs out at age 70, if you manage to delay Social Security for four years, you'll get 132% of your full benefit amount.
The following table shows how much money you might get out of Social Security by claiming at different ages, assuming a full retirement age of 66 and a full benefit amount of $2,000:
TABLE AND CALCULATIONS BY AUTHOR.
Remember, too, that whatever benefit amount you lock in will remain in effect for the rest of your life, so if you're not desperate for the money, it pays to hold off at least until your full retirement age and possibly longer. In our example, delaying benefits just two years resulted in an extra $320 a month, and that's a sum that can go a long way throughout retirement.
2. Work an extra year or two
Though more and more seniors are working well into their 70s, the idea of working that long may not seem appealing. But staying employed even a year or two past your anticipated retirement date could work wonders for your savings.
Currently, anyone 50 or older can contribute up to $6,500 a year to an IRA and $24,000 a year to a 401(k). If your employer offers a 401(k) match, that's an even greater opportunity to grow your savings for some extra income in retirement. Even if you aren't able to max out your retirement contributions, every little bit helps. Imagine you decide to work an extra year and are able to put $12,000 into your 401(k). Over the course of a 20-year retirement, that's an additional $600 a year in income you'll have at your disposal.
See the average retirement age in every U.S. state:
3. Work part-time in retirement
There's a reason so many retirees seek out part-time work. Not only is it a guaranteed way to generate extra income, but it's also a good way to occupy your time and keep your mental and physical skills intact. Better yet, you don't have to just take any old job -- you can turn a hobby into a business or teach a class at a community or learning center. And the more time you spend working, the less time you're likely to spend paying for entertainment, which can really help stretch your budget.
4. Sell your home
If you're sitting on a property you own outright or stand to profit from, unloading that home can be a good way to not only generate extra retirement income, but alleviate the financial burden of maintaining your own space. The average homeowner spends between 1% and 4% of his or her home's value on annual maintenance and repairs. As a retiree, your costs are likely to hit the higher end of that range if your home is aging and you're less physically able to do much of that maintenance and repair work yourself. Rather than have your property serve as an expense, you can sell it and use the proceeds as additional income. Of course, you'll still need a place to live, but the right rental might cost you less than what you're currently paying in annual property taxes and maintenance, and as an added bonus, someone other than you will be responsible for your home's upkeep.
Retirement doesn't have to be a financially stressful period in your life. Whether you follow this advice or employ other tactics for generating extra cash, know that even a few small steps to increase your income could make a big difference over time.
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