Retirement, the golden period of life, beckons with promises of leisure and relaxation. However, the financial landscape in retirement is evolving, demanding a proactive approach to ensure that your golden years are truly worry-free. As the cost of living continues to rise and life expectancy increases, exploring avenues to boost your retirement income is crucial.
This comprehensive guide unveils five straightforward strategies that can significantly impact your financial well-being during retirement. From optimizing Social Security benefits to diversifying your investment portfolio, each strategy will empower you to preserve and enhance your financial security in future years.
Join us as we explore practical and actionable steps to fortify your retirement income. Whether you’re on the brink of retirement or already savoring the joys of this life stage, these easy-to-implement strategies can make a substantial difference in your financial outlook.
Let’s dive in and discover the key pathways to securing a more robust and comfortable retirement income.
Understanding the Importance of Increasing Retirement Income
Retirement once considered a tranquil phase, has taken on new complexities in today’s dynamic economic landscape. As we retire, we’re met with the dual challenge of ensuring our savings outlast our lifespan while navigating the ever-increasing living costs. Understanding the importance of increasing retirement income is the first step toward achieving financial security.
Rising Living Costs
The relentless march of inflation means that the purchasing power of our money diminishes over time. What seems like a substantial nest egg today might need to meet future expenses. From healthcare to daily essentials, the cost of living tends to escalate, and with a proactive strategy, our retirement savings can keep pace.
Advancements in healthcare and improved lifestyles have contributed to longer life expectancies. While this is undoubtedly a positive development, it brings with it the challenge of financing a more extended retirement. Stretching our savings to cover not just a few decades but possibly multiple requires careful planning and acknowledging the need for additional income streams.
Unpredictable Economic Conditions
The global economy is marked by unpredictability, and financial markets can experience volatility. Relying solely on traditional sources of income might expose retirees to risks beyond their control. Increasing retirement income becomes a prudent response to these uncertainties, providing a buffer against economic downturns.
In the following sections, we’ll explore practical strategies to enhance your retirement income. From maximizing Social Security benefits to embracing supplementary income streams, each step is designed to fortify your financial foundation and empower you to enjoy your retirement years confidently. Let’s delve into the first strategy: optimizing Social Security benefits.
- Reduce your investment fees and expenses, and invest in the most tax-efficient manner possible.
- Don’t miss out on catch-up contribution opportunities.
- Increase your eventual Social Security benefit by waiting to claim as long as possible.
Retirement planning today is not what it used to be.
Decades ago, retirees could simply shift their investments into fixed income, which historically paid higher rates of interest. Today, those same investments likely pay very little. Complicating matters further, we’re all living much longer, so we need to be careful we don’t outlive our money.
Needless to say, comprehensive retirement planning and careful investment management are more important than ever. Here are some easy things you can do on your own to help tip the scales in your favor.
1. Reduce your investment expenses and fees.
Reducing your investment expenses and fees is important to maximizing your investment returns. Here are some ways to do it:
- Choose low-cost investments: Look for low-expense ratios, such as index and exchange-traded funds (ETFs). These investments typically have lower fees than actively managed funds.
- Avoid high-commission investments: Be wary of investments with high commissions or sales charges, as these can affect your returns.
- Use a discount broker: Consider using a discount broker instead of a full-service broker. Discount brokers charge lower fees for trades and other services.
- Negotiate fees: If you work with a financial advisor, negotiate their fees to ensure a fair price for their services.
- Consolidate your investments: Consolidating your investments with one provider can help you qualify for lower fees and reduce administrative costs.
- Avoid unnecessary fees: Be aware of any account maintenance fees, transfer fees, or other charges your investment provider may assess. Avoiding these fees can save you money over time.
By taking these steps, you can reduce your investment expenses and fees, which can help you keep more of your investment returns.
Just like inflation can eat into your buying power, any costs related to your investments reduce your return. The easiest way to increase what you earn is to simply reduce your costs.
Especially if you’re invested in mutual funds and exchange-traded funds, you’ve probably got hidden fees. Typical costs include the expense ratio for each mutual fund or exchange-traded funds you own. That’s a fee you pay to the manager of that fund. This fee doesn’t appear on your mutual fund statements, so you have to look for it. This fee is in addition to what you pay your financial advisor if you didn’t buy the funds direct.
There can be other fees, too, such as transaction fees and loads. Always take these fees into consideration when choosing mutual funds and ETFs. With so many products out there, it’s likely there is a lower-cost, similar option.
If you use a financial advisor, be sure to always ask if he or she is using the lowest-cost options for each investment in your portfolio. This is critically important, as even a small percentage compounded over time can make a significant difference in the future. And it’s unfortunately far too common for investors to be put into more expensive investments because they pay the broker a bigger commission.
The end result? Even a modest decrease in investment expenses can result in additional yield for you, which keeps your money working harder for you without taking on any additional risk.
2. Use the most tax-efficient manner.
Investing in the most tax-efficient manner can help you maximize your investment returns and reduce your tax liability. Here are some ways to do it:
- Use tax-advantaged accounts: Invest in tax-advantaged accounts such as 401(k)s, IRAs, and Roth IRAs. These accounts offer tax benefits that can help you reduce tax liability and grow your investments faster.
- Consider tax-efficient investments: Consider tax-efficient investments, such as index funds and ETFs. These investments typically have lower turnover rates, which can help you avoid capital gains taxes.
- Tax-loss harvesting: Consider tax-loss harvesting, which involves selling investments that have declined in value to offset capital gains taxes on other investments.
- Asset location: Consider placing tax-inefficient investments, such as bonds, in tax-advantaged accounts and tax-efficient investments, such as stocks, in taxable accounts.
- Be aware of tax implications: Be aware of the tax implications of your investments, such as the timing of capital gains and losses and how they will affect your tax liability.
By using the most tax-efficient manner to invest, you can maximize your investment returns and minimize your tax liability, which can help you achieve your financial goals faster.
As the old adage goes, it’s not what you make, it’s what you keep that matters. A second way to reduce costs, also without increasing your risk, is to reduce the amount of taxes you have to pay. One way to do this is to make sure you are holding investments with the highest potential tax liability in your tax-deferred accounts (such as a 401(k) plan or a traditional IRA).
Conversely, you would then keep investments with low tax loads in your taxable accounts. For example, investments that may generate ordinary income or short-term capital gains may be best held in your tax-deferred accounts. This might include taxable bond investments, where your interest payments are taxed at higher ordinary income rates. Then, you would keep more tax-efficient investments such as tax-free municipal bonds in your taxable accounts. These small adjustments can help increase the portion of your returns you keep, all with no extra risk.
3. Don’t miss out on catch-up contributions.
If you’re over 50, you may be eligible to make catch-up contributions to your retirement accounts. Catch-up contributions allow you to contribute more money to your retirement accounts than the standard contribution limits. Here’s what you need to know:
- Eligibility: To be eligible to make catch-up contributions, you must be 50 years old or older by the end of the calendar year.
- Contribution limits: The catch-up contribution limits 2021 are $6,500 for 401(k), 403(b), and most 457 plans, and $1,000 for IRAs.
- Deadlines: Catch-up contributions must be made by the calendar year’s end, so ensure you get all the deadlines.
- Benefits: Catch-up contributions can help you boost your retirement savings and compensate for lost time in previous years.
- Plan: If you plan to make catch-up contributions, adjust your budget and savings plan accordingly.
Taking advantage of catch-up contributions can increase your retirement savings and help ensure a more comfortable retirement. Take advantage of this opportunity to save more for your future.
Investing in tax-deferred vehicles is one of the few ways we can turbocharge our investing without extra risk. But our annual contributions are limited. Fortunately, once you are age 50 or beyond, you’re allowed to make additional contributions, which means you can put more into your IRAs, 401(k) plans and other retirement accounts.
There’s also health savings account catch-up contribution allowed once you are 55 or older. All these options allow you to put away more, so you can have more money available to you in retirement. This is a valuable and often underutilized way to boost your retirement savings.
4. Increase your Social Security benefit by waiting.
One way to increase your Social Security benefit is by waiting to claim it. Here’s what you need to know:
- Full retirement age: Your full retirement age (FRA) is the age at which you can claim your full Social Security benefit. For people born in 1960 or later, the FRA is 67. If you claim benefits before your FRA, your benefit will be reduced.
- Early retirement: You can claim Social Security benefits as early as age 62, but your benefit will be reduced by up to 30% if you claim before your FRA.
- Delayed retirement: If you delay claiming Social Security benefits beyond your FRA, your benefit will increase by 8% annually up to age 70. That means if your FRA is 67 and you wait until age 70 to claim benefits, your benefit will be 24% higher than if you had claimed at age 67.
- Benefits of waiting: Waiting to claim Social Security benefits can help ensure a more comfortable retirement by increasing your monthly benefit amount. It can also help you avoid running out of money later in life.
- Consider your options: Before deciding when to claim Social Security benefits, consider your financial situation, retirement goals, and other sources of retirement income.
By waiting to claim Social Security benefits, you can increase your monthly benefit amount and help ensure a more comfortable retirement. Consider your options carefully and talk to a financial advisor for help.
While the future of Social Security may not be certain, for now it’s still a valid income source. The amount of your Social Security check won’t likely be big, but there’s a way you can increase it quite a bit just by delaying it a few years. For every year you delay claiming Social Security past your full retirement age, which is typically 66 or 67, you can get an 8 percent per year increase until you are 70.
If you’re in good health, this is an easy way to bump up your retirement income without additional risk.
Smart retirement planning
Smart retirement planning involves setting clear goals, creating a comprehensive plan, and making informed decisions. Here are some steps to help you plan for a comfortable retirement:
- Set clear retirement goals: Define what you want your retirement to look like and what you want to accomplish. Consider your lifestyle, travel plans, hobbies, and other goals.
- Estimate your retirement expenses: Estimate your retirement expenses, including housing, food, healthcare, and other costs. Use a retirement calculator to help you estimate your expenses.
- Create a comprehensive retirement plan: Develop a comprehensive one that includes your retirement income sources, investment strategy, and savings plan. Consider working with a financial advisor to help create a plan that meets your needs.
- Maximize your retirement savings: Maximize your retirement savings by contributing to tax-advantaged retirement accounts, such as 401(k)s and IRAs. Consider increasing your contributions, especially if you need to catch up on your savings goals.
- Diversify your investments: Diversify your investments to help manage risk and maximize returns. Consider a mix of stocks, bonds, and other investments that match your risk tolerance and investment goals.
- Monitor your plan regularly: Monitor your retirement plan regularly and adjust as needed. Review your investments, expenses, and income sources to ensure you’re on track to meet your retirement goals.
Following these steps, you can create a smart retirement plan that meets your needs and helps you achieve your retirement goals.
In conclusion, there’s nothing easy about retirement planning today. A lot of work goes into building a portfolio that can take you and your loved ones to the finish line.
If you decide to do it yourself, be careful not to take more or less risk than necessary. If you decide to use a professional to help you, you can definitely relax a bit, but not too much.
Remember, it’s your money and you need to always watch it closely. Don’t put things on auto-pilot. Instead, stay involved, ask questions and always monitor all your financial statements. Your future is too important not to.
5. RETIREMENT INVESTORS
Retirement investors face unique challenges when investing, as they need to balance the need for growth with the need to preserve capital. Here are some tips for retirement investors:
- Start early: The earlier you start investing for retirement, the more time your money has to grow. Even small amounts invested regularly can make a big difference over time.
- Diversify your portfolio: Diversification is key to managing risk and maximizing returns. Consider a mix of stocks, bonds, and other investments that match your risk tolerance and investment goals.
- Consider your time horizon: As a retirement investor, you have a longer time horizon than other investors. This means you can take on more risk in pursuit of higher returns. However, you may want to shift your portfolio to more conservative investments to preserve capital as you get closer to retirement.
- Use tax-advantaged accounts: Take advantage of tax-advantaged retirement accounts, such as 401(k)s and IRAs, to maximize your retirement savings and reduce your tax liability.
- Be mindful of fees: Fees can eat into your investment returns over time. Be mindful of the fees associated with your investments and look for low-cost options.
- Consider working with a financial advisor: A financial advisor can help you create a retirement plan that meets your needs and helps you achieve your retirement goals.
By following these tips, retirement investors can create a well-diversified portfolio that balances growth and preservation of capital while taking advantage of tax-advantaged accounts and minimizing fees.
Looking to boost income have an opportunity that probably doesn’t come to mind right away – trading in the options market with strategies like writing covered calls.
It sounds like blasphemy. After all, the standard advice is to play it pretty safe in retirement accounts like IRAs, and options would seem to violate all that. For every winning options bet, someone loses – likely the player with less experience. Most options contracts expire worthless, and since they have a fixed expiration date you can’t just wait for things to turn around like with stocks and bonds.
But don’t write off options in IRAs too soon. After all, many small investors have more money in their retirement accounts than in taxable accounts, so if options appeal to them, the IRAs are where the money is.
“”Yes, you can trade options in IRAs,” says Mike Scanlin, CEO of Born To Sell, an online service for covered-call traders. “Covered calls are by far the most common strategy.”
Scanlin’s customers are typically between 40 and 70 and try to use covered calls to earn 1 to 2 percent a month on the securities involved, he says.
“Covered calls can also be a great way to get a little extra yield from an asset that might be declining but that you feel confident holding on to for the longer term,” says Tom Stevens, owner of RCN Wealth Builders Partners in Seattle.
“”It’s not very common for individual investors to trade options within an IRA,” Stevens says, though he trades options for his clients’ retirement accounts. “”Most investors take a long-term view of IRA assets, a view which we support, and don’t actively trade [in their IRAs]. Options inside an IRA are best suited to a disciplined, active investor that can monitor positions regularly.”
Stock and Options Trading as a Side Hustle
Pulling money out of the stock market on a regular basis is very hard. I do it and so do many others but we are the exception not the rule. Stock trading takes a lot of practice and skill that most people do not have the patience or discipline to learn. I started trading in 2014 with $25,000 and it took me three years of trading before I finally could say I was consistent trader. Sure, I made $20,000 in the first 6 months but then I lost half of that in the second 6 months. I realized that winning trades are not that hard – the trick is to not lose it all plus more. It is primarly an emotional game.
The crazy odds are against us as traders. Something like 80% of new stock traders fail within the first year. This is horrendous odds, especially when you consider many lose their entire accounts! Here is the thing though – this is not much different from any other business venture! If you start a a restaraunt, you are likely to fail and be left with massive business loan debt. So is stock trading really that bad? Really when you consider it, stock trading does not require any debt, has no overhead and has a similar success rate to other businesses. It may well be one of the best business ideas to start!
If you are considering start stock or options trading as a side hustle be warned – it is extremely difficult. It will test you emotionally as well as financially. I highly recommend finding a good mentor so that you have some guidance. This could save you a lot of money. Sometimes you can pay for stock alerts or eBooks that will really help you learn. If you are looking for an eBook that can teach you some great options trading strategies, I highly recommend the Option Profit Accelerator book by a millionaire options trader called Jeff Bishop. The books is 100% free and Jeff is one of the best options traders in the world. He runs a stock and options alert service as well (RagingBull stock reviews). Sometimes paying for some stock alerts that tell you when to buy and sell can be worth it. They can teach you a strategy and fast track your learning curve.
If it is done properly, stock trading can be a very lucrative side hustle. You can buy a stock and hold it for a few days while it increases in price then sell it for a profit. It is a fantastic way to work from home and make money passively. Don’t underestimate how difficult it is and how much work and learning is required to be a consistently profitable trader!
Stock and options trading can be a lucrative side hustle for individuals interested in and knowing about the stock market. However, it’s important to note that trading involves risk, and it’s important to have a solid understanding of the market and trading strategies before getting started. Here are some tips for those interested in stock and options trading as a side hustle:
- Educate yourself: Before starting, educate yourself on the stock market, trading strategies, and the risks involved. Consider taking courses or reading books on the subject.
- Start small: Start with a small amount of money and gradually increase your investments as you gain experience and confidence.
- Develop a trading strategy: Develop a trading strategy that matches your risk tolerance and investment goals. Consider market trends, company earnings reports, and economic indicators when trading.
- Keep track of your trades: Keep track of your trades and analyze your performance to identify areas for improvement. Use a trading journal or spreadsheet to track your trades and monitor your progress.
- Manage your risk: Manage your risk by setting stop-loss orders and diversifying your portfolio. Don’t put all your eggs in one basket; be prepared to accept losses as part of the trading process.
- Consider using a trading platform: Consider using a trading platform that offers tools and resources to help you make informed trading decisions. Many platforms also offer virtual trading accounts, which allow you to practice trading without risking real money.
By following these tips, individuals can start stock and options trading as a side hustle and earn extra income. However, it’s important to remember that trading involves risk and to approach it with caution and a solid understanding of the market.
Failure is only the opportunity to begin again, this time more intelligently.
– Henry Ford (1863-1947)
Ask yourself this question: ‘Will this matter a year from now?’
–Richard Carlson, American psychotherapist and author of Don’t Sweat the Small Stuff
A failure is not always a mistake. It may simply be the best one can do under the circumstances. The real mistake is to stop trying.
–B.F. Skinner (1904-1990)
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