3 Proven Ways to Get More Income in Retirement

By Markets Fool.com


Image source: 401kcalculator.org via Flickr.

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When you're retired, making ends meet can be tough, and it's useful to have as much income as possible at your disposal. Finding new sources of income takes some effort, but making the most of the opportunities you have can go a long way toward helping you cover your living expenses and still have something left over. Below, we go through three ways that you can boost your retirement income and feel more financially secure in your golden years.

Selena Maranjian: A tried-and-true method of generating income in retirement is via dividend-paying stocks. A particularly attractive feature of dividends is that healthy companies will keep paying them to shareholders no matter whether the country's economy is doing well or poorly. It's also worth noting that having a meaningful chunk of your nest egg in dividend payers isn't any kind of surrender or compromise, either -- dividend payers are solid performers.

According to Ned Davis Research, for example, from 1972 through 2014, dividend-paying stocks averaged an annual gain of 9.3% vs. just 2.6% for non-dividend payers. Want more? Fidelity data shows that from 1993 through 2014, dividends accounted for about 40% of the 10.3% average annual return of the S&P 500.

Just what can you expect, income-wise, from dividends? Well, you can certainly find some dividend yields of 8% or 12% out there, but in general, super-high yields can be risky, as they're often tied to stocks that have plunged. There are gobs of healthy, growing companies yielding 3% or more, and plenty yielding 4% or more. If you can sock $200,000 into such stocks in retirement, you can collect perhaps $8,000 or more annually in dividend income -- without selling any shares. Ideally, those shares will also rise in value over time, and the dividend payouts are likely to increase as well.

If you're eager to gobble up some dividends now, companies like Chevron, AT&T, and Ford are worth a closer look. Each has a rating of at least four stars (out of five) in our CAPS community, and each yields at least 4%. Dividend stocks can be a great way to earn more in retirement.

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Todd Campbell: The most obvious way to boost income in retirement is to work at least part-time. However, working part-time can also increase your retirement income in less obvious ways.

For instance, retirees who claim Social Security prior to their full retirement age will have $1 withheld from their Social Security check for every $2 that they earn above an annual income limit. In 2016, that limit is $15,720. However, any money that's withheld increases the amount of Social Security income a retiree receives once they reach their full retirement age. Essentially, this means that some of your Social Security income is being deferred for later on, when you may be physically unable to continue working part-time.

Also, working part-time can bump up retirement income if those earnings are invested in a Roth IRA. In 2016, retirees can contribute up to $6,500 (if over age 50) of their after-tax earned income to a Roth IRA.

Contributions to a Roth IRA can grow tax-free, and because Roth IRAs don't require that minimum distributions begin at a specific age, money that's set aside in them from working part-time may result in a bigger retirement nest egg that can kick off additional income in retirement, too.

Dan Caplinger: If you want to get more income in retirement, making the most of Social Security is essential. Social Security is a key source of retirement income for the vast majority of Americans, and there are several ways you can squeeze more in benefits out of the program.

There are two things you can do that will have the biggest impact on your benefits. First, Social Security looks at your 35 top-earning years after adjusting for inflation in determining the amount of your check. So if you haven't worked for 35 years, staying in your job a little longer will boost your monthly benefits.

The other essential item is claiming benefits at the best possible time. Your baseline benefits are what you'll get by retiring at full retirement age, which for those retiring now is 66. Many people claim early, accepting monthly payments that are 25% smaller than the baseline amount in exchange for getting them sooner. If you wait until age 70, you can get payments that will be 32% larger than at full retirement age. Overall, that's a wide swing of between $0.75 and $1.32 on the dollar. Yet obviously, the earlier you claim, the more of those small checks you get, and so the timing of when you need the money comes into play as well. By being smart about these two decisions, you can bulk up your retirement income.

The article 3 Proven Ways to Get More Income in Retirement originally appeared on Fool.com.

Dan Caplinger owns shares of Ford. Selena Maranjian owns shares of Ford. Todd Campbell has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Chevron and Ford. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.