Don’t assume that your retirement income is fixed. You can increase it — and live off of more money in the future.

If you think of the term “fixed income,” you probably think of retirees. After all, people in retirement are typically relying on Social Security benefits, which are set by certain formulas, and perhaps on required minimum distributions from retirement accounts.

But there’s a lot more flexibility to retirement income than you may think. Here are 10 ways that you can boost your income in retirement — with some requiring action now and some later.

1. Increase your saving and investing now
Beef up your saving and investing, and the difference it can make may surprise you. Imagine, for example, that you think you’re doing pretty well saving $1,000 per month for retirement. But if you could sock away $1,200 or $1,500 instead, that would amount to $14,400 or $18,000 per year instead of your current $12,000. Here’s how much you might accumulate with those sums:

Growing at 8% for $12,000 invested annually $14,400 invested annually $18,000 invested annually
3 years $42,073 $50,488 $63,110
5 years $76,031 $91,237 $114,047
10 years $187,746 $225,295 $281,619
12 years $245,944 $295,132 $368,915
15 years $351,891 $422,270 $527,837
20 years $593,075 $711,690 $889,613

The table above shows that if you’re only a decade from retirement, boosting your savings from $1,000 per month to $1,500 per month might net you close to $94,000 more by retirement.
Increasing your savings by that much can seem a tall order, though. You may have to think hard about how to achieve it. Skipping a pricey fancy coffee drink each day isn’t a new idea, but it’s powerful — saving you perhaps $3,000 annually. Cut the cable cord and just stream your video entertainment and you might save $50 per month or $600 per year. If you’re paying $50 per month for a gym membership that you don’t use, canceling it can save another $600 annually. Make a few phone calls to car and home insurance companies and you may find better deals than you have now, netting hundreds of dollars in savings annually. If you smoke, consider the financial benefit of quitting — though not an easy process, it can probably save you thousands of dollars annually.

2. Work a few more years

Working a little longer than you might ideally want to is another effective strategy. It not only helps your retirement account(s) grow plumper, but it also means there will be fewer years that your nest egg has to support you. You might enjoy your employer-sponsored health insurance for a few additional years, too
The table above can help you see the value in this strategy. Imagine that you plan to retire in 10 years. The table suggests how much you might amass between now and then — and it also shows what you might have after 12 years and 15 years. If you can sock away $1,000 per month for a decade, it might grow to $187,746, but if you can hang in there for another two years, you’re looking at $245,944 — a difference of almost $60,000!

3. Work a little in retirement

Another strategy is to work a little in retirement, perhaps for the first few years. Working just 12 hours per week at $10 per hour will generate about $500 per month in extra income. If you can work a few more hours or can earn a higher wage, you’ll collect even more.

A part-time job can also give your days more structure and regular opportunities for socializing — things that many people find they really miss in retirement.

4. Consider dividend-paying stocks

You can generate income in retirement by selling off shares of stock from your stock portfolio over time — but with dividend-paying stocks, you can collect income without having to sell any shares! A $400,000 portfolio, for example, that sports an overall average yield of 3% will generate about $12,000 per year — a solid $1,000 per month. Dividend income isn’t guaranteed, but if you spread your money across a bunch of healthy and growing companies, you’re likely to receive regular payments. Better still, companies tend to increase their dividend payments over time, and that can help your income keep up with inflation.

A dividend-focused exchange-traded fund (ETF) can be a fine option, too. The iShares Select Dividend ETF (DVY), for example, recently yielded about 3.2%. Preferred stock is another way to go. The iShares U.S. Preferred Stock ETF (PFF) recently yielded 5.6%.

5. Consider annuities for pension-like income

You may not have a pension, but an annuity or two can provide dependable pension-like income. It’s true that some annuities, such as variable annuities and indexed annuities, can be quite problematic, often charging steep fees and sporting restrictive terms. But another kind — fixed annuities — are well worth considering. They’re much simpler instruments that can start paying you immediately or on a deferred basis.

Below are examples of the kind of income that various people might be able to secure via an immediate fixed annuity in the current economic environment. (You’ll generally be offered higher payments when interest rates are higher.)

Person/People Cost Monthly Income Annual Income Equivalent
65-year-old man $100,000 $562 $6,744
65-year-old woman $100,000 $536 $6,432
70-year-old man $100,000 $643 $7,716
70-year-old woman $100,000 $607 $7,284
65-year-old couple $200,000 $941 $11,292
70-year-old couple $200,000 $1,036 $12,432
75-year-old couple $200,000 $1,195 $14,340

A deferred annuity might also be useful. It starts to pay you at a future point, such as when you turn a certain age. A 60-year-old man, for example, might spend $100,000 for an annuity that will start paying him $1,037 per month for the rest of his life beginning at age 70. Deferred annuities are a good way to avoid running out of money late in life.

6. Collect income from interest

This retirement income strategy — collecting income from interest-paying investments — isn’t very powerful in our low-interest rate environment. But rates seem to be on the rise, so it can be worth considering now or in the coming years. Right now, if you park $100,000 in certificates of deposit paying 3% in interest, you’ll collect $3,000 per year, hardly a helpful sum. Back in 1984, though, rates for five-year, one-year, and six-month CDs were in the double digits. If you could get 10% on a $100,000 investment, you’d enjoy $10,000 per year, equivalent to about $830 per month. Low interest rates not only deliver little income, but they also don’t keep up with inflation. (Inflation has averaged about 3% over many decades.)

Bonds are an attractive interest-paying option, too, but the safest ones (from the U.S. government) tend to pay modest interest rates, especially in low-interest rate environments. Still, if you have a lot of money, you might make this strategy work by buying a variety of bonds that will mature at different times, generating income over many years.

7. Consider a reverse mortgage

In a reverse mortgage, you essentially get a loan from a lender, often in the form of monthly (tax-free) payments during your retirement, with your home as the collateral. The loan doesn’t have to be paid back until you no longer live in your home. That can sound great, but note that reverse mortgages do have some drawbacks, such as requiring your heirs to sell your home unless they can afford to pay off the loan. Still, if you need the income and no one is counting on inheriting your home, this can be a good retirement income strategy. It’s important to learn a lot more about reverse mortgages before getting one.

8. Relocate — to a less costly home or region

Relocating is also a strategy worth considering. You might simply downsize and move to a smaller home — or you could move to a region with lower taxes or a lower cost of living. Either way, you may end up spending less on taxes, insurance, home maintenance, utilities, landscaping, and so on. The median home value in California, for example, was recently about $409,300, but it was only $224,600 in Utah and only $157,100 in North Carolina.

9. Borrow against your life insurance policy

Here’s a strategy that doesn’t occur to many people: If you have a life insurance policy that no one is depending on — such as if the children you meant to protect with it are now grown and independent — you might consider borrowing against it. This can work if you’ve bought “permanent” insurance such as whole life or universal life, and not term life insurance that generally only lasts as long as you’re paying for it. You’ll be reducing or wiping out the value of the policy with your withdrawal(s), but if no one really needs the ultimate payout, it can make sense. Plus, the income is typically tax-free.

10. Make the most of Social Security

Finally, know that the benefits you’ll ultimately collect are not set in stone. There are ways that you can increase your Social Security benefits. For example, for every year beyond your full retirement age that you delay starting to collect benefits, they will grow by about 8%. Delay from age 67 to 70 and you’ll boost your benefits by 24%. It’s not quite as powerful as it seems, though, because while your checks will be bigger, you’ll be collecting a lot fewer of them. Your age when you start collecting won’t actually make much difference if you live an average-length life, but if you stand a decent chance of living a long time, bigger checks can be quite welcome. Read up on spousal strategies, too, because coordinating when you and your other half start collecting can benefit you both.

Don’t assume that your retirement income will be fixed. Taking some actions now and employing some strategies can give you a lot more money to live off of in your golden years.
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