Retirement is when most people are assumed to be living on a "fixed income." Well, yes, Social Security checks can remain fixed for a few years, though they do rise over time to keep up with inflation. Some other income sources, such as bonds, might also offer fixed income.
Fortunately, though, there are plenty of ways that you can increase your retirement income, to make it less fixed. You can even employ a Social Security strategy or two to make your future checks bigger.
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Here are eight ways to increase your retirement income.
1. Delay retiring
This is probably not the kind of tip you wanted to see, but it's a powerful one. If you can work a few more years than you originally planned to, there are multiple benefits: Your nest egg can grow while you put off starting to tap it -- and it will have to support you for fewer years. You might enjoy your employer-sponsored health insurance for a few more years, too, perhaps also while collecting a few more years' worth of matching funds in your 401(k).
The table below shows what a difference an extra year or two can make in your investing -- if you're socking away $10,000 annually and it's growing by an annual average of 8%:
You can't completely count on this strategy, because many times we end up retiring earlier than we planned, due to an unexpected job loss or health setback. If you can employ it, though, give it some consideration.
2. Work a little while retired
Instead of working longer, or in addition to doing so, you might also ease into retirement by working a little in your first few years of retirement. Working just 12 hours per week at $10 per hour will generate about $500 per month. A part-time job can also give your days more structure and opportunities for socializing. Many retirees find themselves restless and a bit lonely in retirement, and a low-stress job on the side can be quite helpful.
Be aware, though, that if you're planning to start collecting Social Security benefits before your full retirement age, which is 66 or 67 for most of us, and you want to work some then, too, your benefits may be reduced. As the Social Security Administration explains: "If you're younger than full retirement age during all of 2017, we must deduct $1 from your benefits for each $2 you earn above $16,920." The year you reach your full retirement age, the earning limit jumps to $44,880, and the penalty decreases to $1 withheld for every $3 earned above the limit. Fortunately, though, the money withheld isn't lost. Instead, it's factored into the benefit checks you receive later, which end up increased.
3. Pick the best health insurance plan for yourself
The health insurance coverage you choose can have an effect on how much you spend out of pocket on healthcare in retirement. (This is a big deal: According to Fidelity Investments, a 65-year-old couple retiring today will spend, on average, a total of $275,000 out of pocket on healthcare.) Once you're 65, you qualify for Medicare -- and in order to avoid paying a penalty premium every year, you need to not be late signing up. Know that you can choose between original Medicare (Part A and Part B, often with Part D and/or supplemental plans) and Medicare Advantage plans. There are pros and cons to each. For example, original Medicare is accepted across the country by thousands of doctors, whereas Medicare Advantage plans tend to be based in a region, offering access to a certain network of doctors. Medicare Advantage premiums can be lower, plus the plans feature out-of-pocket spending caps.
4. Make the most of retirement savings accounts
The more you contribute to tax-advantaged retirement savings accounts such as IRAs and 401(k)s, the more money you'll have in retirement. There are two main kinds of IRA -- the Roth IRA and the traditional IRA and for both in 2017, the contribution limit is $5,500 for most people and $6,500 for those 50 and older. (Limits are occasionally increased, to keep up with inflation.) That might not seem like a lot of money, but it's quite powerful if it can grow for many years. The table below shows how much money you can accumulate with annual $5,500 contributions at different average annual rates of growth:
A 401(k) has even more generous contribution limits -- for 2017 it's $18,000 and in 2018 it's 18.500 -- plus an additional $6,000 is allowed in both years for those 50 or older. Give particular consideration to Roth IRAs and increasingly available Roth 401(k)s, as they let you withdraw money in retirement tax-free!
5. Collect dividend income
Having a portfolio of stocks in retirement means you can sell shares for income at any time. But if you're holding dividend-paying stocks, you can collect income without having to sell any shares! For example, a $300,000 portfolio with an overall average yield of 4% 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'll likely receive regular -- and growing -- payments. Here are a few well-regarded stocks with significant dividend yields:
A dividend-focused exchange-traded fund (ETF) can serve you well, too, offering instant diversification. The iShares Select Dividend ETF, for example, recently yielded about 3%. Preferred stock is another way to go. The iShares U.S. Preferred Stock ETF recently yielded 5.7%.
6. Consider a reverse mortgage
Another way to boost your retirement income is to get it from the equity in your home -- via a reverse mortgage. A lender will provide (often tax-free) income during your retirement, and the loan doesn't have to be paid back until you no longer live in your home -- such as when you move into a nursing home or die. It has some drawbacks, though, such as requiring your heirs to sell the home unless they can afford to pay off the loan. Still, if you need additional income in retirement and no one is counting on inheriting your home, it can be a solid solution.
7. Move -- to a cheaper home or region
You can increase your retirement income by spending less of it on home-related expenses. If you downsize and move to a smaller home -- or you move to a region with lower taxes or a lower cost of living -- you can 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 $386,000, but it was only $248,000 in Colorado and only $140,000 in South Carolina.
8. Maximize Social Security
Finally, you can boost your retirement income by being savvy about strategies that can increase your Social Security income. For starters, you can increase or decrease your benefits by starting to collect Social Security earlier or later than your "full" retirement age, which is 66 or 67 for most of us. If you're married, you can maximize your benefits by coordinating with your spouse when you each start collecting. If you and your spouse have very different earnings records, for example, you might start collecting the benefits of the spouse with the lower lifetime earnings record on time or as early as age 62, while delaying starting to collect the benefits of the higher-earning spouse. That way, you both get to enjoy some income earlier, and when the higher earner hits 70, you can collect their extra-large checks. Also, should that higher-earning spouse die first, the spouse with the smaller earnings history can collect those bigger benefit checks as survivor benefits instead of their own smaller checks.
If you've figured out how much money you'll need in retirement and you're worried about how you'll generate the income you'll need, consider some of the strategies above. They can put hundreds or even thousands of dollars more in your pocket each year.
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Selena Maranjian owns shares of AbbVie, National Grid, and Verizon Communications. The Motley Fool owns shares of and recommends National Grid and Verizon Communications. The Motley Fool has a disclosure policy.