How To Make Extra Money In Retirement
If you want a comfortable retirement, you need to have money coming in. There are several ways to make this money, whether you are retired now or will be in a few years. And the sooner you get started, the more ways you’ll have to make extra money.
After a lifetime of work, it can be nice to have your money work for you. You’ll also have money in Social Security because you worked and paid taxes. But even though Social Security is a good place to start, it wasn’t made to cover all your retirement needs, so you’ll need to find other ways to make money in your golden years.
There are various methods to make money after you retire, but it doesn’t hurt if you already have a lot of money from when you worked. If you do, you’ll be able to turn it into different ways to make money, depending on your needs and willingness to take risks. And if you plan carefully, you might be able to cut your taxes in retirement by a lot.
Social Security
Social Security can be the foundation of any plan for getting money in retirement. It was never meant to be a complete solution for getting money in retirement, but it does offer a lot. The best thing about the schedule is that you’ve already paid into it by the time you retire, so there’s nothing left for you to do.
You don’t have to worry about making another investment or putting money away from your paycheck in some other way. A retired worker’s average Social Security payment is more than $1,500 a month; some people get much more. This money can give you a solid base of income, but you’ll probably also need to get money from other sources, like the ones below.
You can also increase your Social Security payment by up to 24% if you are willing to wait to get them. You can also get more money out of your Social Security check in other ways. If you are one of the lowest earners, you may be able to get your monthly check without having to pay taxes on it. Even if you make a little more, you can still get some of your benefits without paying taxes.
Rental income
Owning a rental property can be a great way to make money in retirement, and if you invest in residential real estate, it doesn’t have to be too hard. Even though you’ll have to spend some time taking care of the property, it can make you a lot of money in the long run.
When renting a house, it can be smart to think a few years ahead because you can make more money that way. Rents tend to go up over time, which gives you more money to cover costs like your mortgage. And as time goes on, you can pay down or refinance your mortgage, giving you more room to breathe with your expenses and more money in your pocket when you retire.
But it’s important to remember that real estate also needs money. It’s not just a way to make money in one way. It’s time to replace the roof, fix the furnace, and so on. If you don’t have much money, you should plan for an unexpected repair and have cash on hand.
CDs
CDs are one of the simplest and best ways to make money for retirement. The bad news is that interest rates are just above all-time lows, so now is not a great time to buy CDs. CDs are easy to purchase, and CDs from banks backed by the FDIC are safe. A CD ladder allows CD investors to spread out the risk of putting all their money in at once.
With a ladder, you can set up CDs with different expiration dates, for example, one every year for five years. Whenever the one-year CD matures, you wrap it into a five-year CD and stand in line for the next CD to mature, which is now just a year away. So, you’ll always have a CD about to mature, giving you easy access to money and reducing your risk with interest rates.
You might also come up with a plan for barbells. About half of your money goes into long-term CDs, where the interest rates are usually higher, and the other half goes into short-term CDs, where the money is more liquid, and you can get it when you need it. The return on your money is average, but you can easily access cash.
Annuities
Annuities have always been popular for retirees, but they have both good and bad points. Anyone thinking about getting an annuity should know that they are very complicated, even though the benefits, like a monthly check, are easy to understand.
With annuities, you have a lot of choices. You can set up your annuity to have insurance-like benefits, like a death benefit, and you can even give your spouse the monthly income. You can set the amount of the possible paycheck or let it change. You can start making payments right away or at a later date.
But all of these options make it harder to understand and cost more. Annuity agreements are almost known for being hard to understand and complicated. Still, an annuity can help the right person have a more fun retirement by giving them a steady monthly income.
Bond funds
Bond funds are a good way to get a balanced portfolio without choosing each bond. For example, a bond ETF can give you access to a wide range of bonds or a narrow range of bonds, depending on how much exposure you want.
You can choose between issuers like the federal govt, corporations, states, and local governments. You can choose from bonds with short, medium, or long terms. You can get bonds from riskier companies, like high-yield or junk bonds. And there are even more strange choices.
For example, you can find funds for short-term government bonds or intermediate-term corporate bonds. You can also choose to have a mix of different types of bonds. You can also look for funds that offer a wide range of municipal bonds that don’t have to be taxed.
Bond funds give you a lot of choices and are better to deal with than bonds themselves. Bonds offer steady income, and even though interest rates aren’t very high right now, bonds are usually safer than stocks and other market-based investments.
Bottom line
With interest prices as low as they are now, it’s not easy to make money these days. There is no longer a safe return of 5% on CDs or corporate bonds. But if you put in some work and plan, you can find the best results. The earlier you start, the quicker you can ensure you have enough money for retirement.
