We try our best to save for retirement, but sometimes our account balance just doesn't reflect our hard work. This can be frustrating and stressful, especially to those rapidly approaching retirement age. But the situation may not be as dire as it seems.
There are other ways to fund retirement besides your personal savings and investments. Here are three out-of-the-box ideas you may want to consider.
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1. Your health savings account (HSA)
Health savings accounts (HSAs) are meant to hold money for medical expenses, but they can also serve as backup retirement accounts. Money you put in an HSA reduces your taxable income for the year, just like contributions to tax-deferred retirement accounts. And some HSA providers enable you to invest your funds to help them grow more quickly.
You're allowed to make tax-free medical withdrawals at any age, but you can also make nonmedical withdrawals. You will owe taxes on these, and you'll pay a 20% penalty if you're under 65. But if you're comfortable leaving your money alone until then, you can draw upon your HSA as if it were another retirement account.
If you don't have an HSA, you can open one with many banks or brokers as long as you have a qualifying health insurance plan. That's one with a deductible of $1,400 or more for an individual or $2,800 or more for a family. Individuals who qualify may contribute up to $3,650 in 2022, while families may contribute up to $7,300.
2. A side hustle
Retirement is a great time to dive deeper into your passions. While you're at it, you might try to make some money off of them. It's up to you to decide what you want to do. You might look for something more flexible in the industry you've always worked in -- for example, consulting for other companies. Or you might choose something that's totally different from what you did all your life.
Think about where your skills and talents intersect, and brainstorm ways you could turn that into a business. These days, there are plenty of apps and websites where you can market your skills.
If you're serious about starting your own business in retirement, make sure you understand the costs associated with it as well. For example, driving for a ridesharing company brings extra insurance costs and added wear and tear on your vehicle. You may also want to consider working on your side hustle before you retire so it's already profitable by the time you quit your job.
3. Renting or selling your home
There are a few ways to squeeze money out of your home these days. One of the simplest is to sell it. This could result in a handsome profit if you own your home outright or have substantial equity. Then, you can look for a new, more affordable place, possibly somewhere with a lower cost of living.
If you're not willing to part with your home, consider renting it out. This is a smart option for those who travel often. Short-term vacation rentals are popular these days, and this type of arrangement gives you the freedom to choose when your home is available to rent.
A long-term rental might be a great idea if you own a duplex or a building with separate quarters for another tenant. This will provide you with a predictable monthly payment, but you have to remember to set some of this aside to cover any repairs or updates the rental needs.
This isn't a comprehensive list of ways to make extra money in retirement, but hopefully it got you thinking about some less-traditional retirement funding strategies. See if you can brainstorm any more on your own and then look over your retirement plan to see which ones might work for you.
