Most of us look forward to our golden years and the chance to finally work on our hobbies and spend more time with family. However, one potential down side to retiring is having less income than what you’re used to living on. Luckily, there are a number of actions you can take to improve your financial situation and enhance your retirement lifestyle.
Get out of debt
Although many people pay off their mortgage before retiring, it’s okay to still carry a mortgage balance, according to a recent article. However, it’s advised that you try to pay off any credit card debt as soon as possible due to the fact that most credit cards charge high interest rates. For example, if you had a $10,000 balance with a rate of 25%, you’d be paying around $2,500 in interest per year. Imagine if you could save that money instead.1
Work longer or get a part-time job
Although it may not sound appealing, working longer and retiring later can be very impactful. It allows you to save more for retirement, including any employer contributions to your workplace retirement savings plan. Working longer also allows you to delay when you have to start drawing down on your portfolio.
If you’ve already retired, consider getting a part-time job. This could include doing freelance work, tutoring, consulting for your former employer or just doing something fun.1
Invest smarter
Reevaluate any stocks and mutual funds that you’ve held for a long time. Make sure they’re still in line with your investment goals, risk tolerance and retirement timeline. Identify whether you’re paying any unnecessary fees. The article recommends you consider dividend paying investments because they’ll continue generating income regardless of the economy. However, be sure to choose healthy and growing dividend paying stocks/funds. If you’re not particularly investment savvy, another option is to go with less expensive, broad-market index funds.1
Maximize social security
The article cautions seniors against assuming their social security benefits are fixed or that they’ll be enough. “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, and you can make some smart moves by coordinating with your spouse when you each start collecting.” One strategy is to start collecting the lower earner’s social security benefits first, in order to allow the higher earner’s benefits to grow.1
Consider a reverse mortgage
Reverse mortgages have their pros and cons, so it’s important to speak with a knowledgeable loan officer to determine if this product is right for you. A Home Equity Conversion Mortgage (HECM), commonly known as a reverse mortgage, is a Federal Housing Administration insured loan. A HECM enables seniors age 62 and older to access a portion of their home’s equity to obtain tax free2 funds without having to make monthly mortgage payments.3
Spend less
Although this tip goes without saying, there are actually a number of ways to save that you may not have thought of. For example, canceling cable and streaming instead or canceling any subscriptions you don’t use. If you have multiple cars, you could downsize to one. Spending more time cooking at home with friends will save you money on travel and eating out. The article even suggests canceling your life insurance policy if you no longer have anyone depending on you financially. However, it’s always best to consult a trusted advisor before making important financial decisions.1
Move to a less expensive place
Another idea is to downsize or move to a less expensive area or part of the country. The article gives the following example – The median home value in California recently was approximately $371,000, whereas in North Carolina it was only $154,000.1
Be creative
If you think outside the box, you may be able to find even more ways to save money. You could rent out a room via Airbnb or take in a boarder. If you don’t have one already, consider a credit card that offers cash-back or rewards. For example, if you were to earn 3% back on what you spend for groceries and gas, this could amount to around $250 per year. You could sell items you no longer need, or donate them for a tax deduction. If you’re crafty, consider selling your wares at local events or online.1
If you’d like to learn more about reverse mortgages or want to find out if you’re eligible, call 800-218-1415.
1 10 Ways You Can Get More Money in Retirement – fool.com, by Selena Maranjian, 6/20/16, http://www.fool.com/retirement/2016/06/20/10-ways-you-can-get-more-money-in-retirement.aspx.
2 Consult your financial advisor and appropriate government agencies for any effect on taxes or government benefits.
3 You must live in the home as your primary residence, continue to pay required property taxes, homeowners insurance and maintain the home according to Federal Housing Administration requirements.
Author: Meredith Manz