Retirement isn't always the leisurely period many of us expect it to be. Countless seniors struggle financially during retirement, and face loads of money-related stress. If you're in a situation where you've left your career behind and need money, you have several options for boosting your retirement income. You could, for example, get a part-time job, and use your wages to help cover the bills.
But here's another idea: Instead of pushing yourself to work during a time in your life when you'd rather be taking it easy, why not use your home as a source of income? Here are several ways your property can serve as a critical cash cow when you need it.
1. Sale proceeds
Though there are always exceptions, home values have a tendency to rise over time, especially in and near thriving cities. Case in point: The median home value in the country was $47,200 back in 1980. By the year 2000, it had climbed to $119,600. If you're sitting on a property whose value has increased substantially, downsizing to a more modest space could put a sizable chunk of cash back in your pocket -- especially if you no longer owe money on your mortgage, which tends to be the case for most retirees.
Say you own your property outright and can sell it for $500,000. If you can find a smaller space that suits your needs for $200,000, you'll get to pocket the difference and use that cash to cover your bills.
2. Full-time tenants
Perhaps you bought a larger home in your 30s or 40s to accommodate your growing family. But if your children have since become adults and moved out, which is common among retirees, then you probably have an excessive amount of space on your hands. If that's the case, but you'd rather not leave your home or community, then rather than sell your property, you could try renting part of it out.
Taking in tenants is especially feasible if you have a finished basement or garage that's separate from the rest of the house. This way, both you and your prospective tenants can get the privacy you need.
Furthermore, you can seek out short-term or long-term tenants, depending on how much income security you're going for. If you're convinced you'll be in a better position a year or two down the line (say, you expect an inheritance to come in), then you might try renting your home out to college students, whose needs tend to change from year to year. On the other hand, if you're looking for a tenant who's less likely to jump ship, you can seek out families who might be drawn to your school district.
3. Seasonal rentals
Maybe you don't want to sell your home, and you're also not thrilled with the idea of having someone else living in it all the time. If so, you might still manage to snag a decent chunk of income by renting your home on a seasonal basis. If you live near a popular ski area, for instance, you can rent out part (or all) of your home during peak winter weekends, and remain tenant-free for the rest of the year. Similarly, if you're right off the beach, you can take in paying guests during the summer and have the place to yourself once September rolls around.
Best of all, if you rent out your property for 14 days or less within the same calendar year, you won't lose a portion of your related income to taxes. So depending on your circumstances, it might actually pay to limit the extent to which you rent out your home, even if the demand is there.
4. A reverse mortgage
Though there are certain drawbacks to going this route, if you're really strapped for cash during retirement, you might consider a reverse mortgage on your home, where a lender pays you a certain amount of money each month in exchange for equity in your property. If you qualify for a reverse mortgage (which may be the case if you're 62, have equity in your home, and consider it your primary residence), you'll get access to the cash you need without having to sell or vacate your property. On the other hand, there are certain pitfalls you might encounter with a reverse mortgage, from high closing costs to not having the option to leave your home to your children, so be sure to weigh the pros and cons carefully.
Owning a home in retirement can be a financial lifeline when money gets tight. If you're retired and low on cash, it pays to explore your options for turning your home into a much-needed income stream.
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