As you're likely to realize soon if you haven't already, a dollar doesn't go as far as it used to. That could make retirement a tricky time for some underfunded investors, and Social Security checks probably aren't (or won't be) big enough to be a game-changer either. It's not inconceivable you'll need to rethink your retirement plans sooner or later if you want to pay all your bills as well as have a little fun later in life.
To this end, here's a rundown of five ways to generate cash you can live on in your golden years, from the most obvious to the least obvious. The last two are particularly unusual, yet still worth considering.
Painfully obvious: Dividends
You may have spent the better part of your life investing for growth, not looking for income -- cash -- while you did. Your paycheck likely covered your recurring expenses and perhaps even served as the seed money for your retirement stash.
Living on profits stemming from capital appreciation of growth stocks, however, is a famously bad idea. You may need to free up some cash by selling stock at the worst possible time, getting out of a stock at a loss before it's had a chance to recover. For perspective, a bunch of growth portfolios are now worth 20% less than they were just a few months back.
The solution to the conundrum is obvious: less growth, more dividends. Even when their prices are upended, a good dividend stock's payout is actually quite reliable.
For perspective, the average S&P 500 stock that pays a meaningful dividend is currently paying out about 2% of its value.
Not surprising: Working
It's not what most current and future retirees were planning. The fact is, however, many of us may be going back to work later in life if we haven't yet. Think tank Rand Corporation reckons around 40% of employees in the United States that are 65 years of age or older actually retired at one point but reentered the workforce. That's roughly 10 million workers, or nearly one-fifth of that demographic.
There's one important rule to know if you're at this age but already collecting Social Security checks. That is, if you earn enough at a job, Social Security will reduce your monthly benefit. For 2022, every $2 above annual earnings of $19,560 lowers your monthly check by $1. It may still be well worth it though, especially since you can earn back some of those Social Security benefits reduced by working.
Makes enough sense: Rental property
Obviously, being a landlord requires you to own real estate you yourself don't need to live in. If you don't own a second residence to rent out, move on to the next retirement income idea.
If you do have a second home or half of a duplex though, now's a great time to monetize it. Rental rates are sky-high rate now due to a housing shortage that isn't likely to abate anytime soon. Market research outfit RSM suggests the United States needs about 3.5 million more homes that it currently has to achieve market stability. Moreover, the country will need to be build 1.7 million new houses per year through 2030 to fully keep up with demand growth. That's an incredibly tall order, boding well for anyone with homes to rent in the meantime.
Crazy enough to work: Flipping stuff
If you're not familiar, "flipping" is a slang term referencing the act of buying something secondhand for the purpose of quickly reselling it at a higher price -- you keep the difference. And you can flip anything. Furniture, toys, consumer electronics, and antiques are just some of the markets where buyers and sellers value convenience more than money.
It sounds crazy at first, but plenty of people are not only making money doing it, but having fun while they're doing it. Reported incomes range from a few hundred to a few thousand dollars per month.
Flipping requires a couple of things. First, it requires a keen awareness of what something is worth. If you know nothing about tools, buying and selling power drills isn't going to be your thing; stick with the goods you know about.
Second, flipping requires a way to buy the goods and a means of reselling them. Yard sales and thrift stores are often go-to sources for inventory, while online marketplaces tend to be the best way of selling those items at the best price. Sometimes simply listing and being willing to ship something is worth a fortune.
That being said, start small and learn the nuances of this hustle before aiming for bigger profits.
Yes, it's actually a thing: Renting out your car
Finally, if you're willing to let someone else drive it, there are people out there that would rather rent your car than rent one from a conventional auto rental venue. Personal car-rental service HyreCar reports you can make as much as $9,000 per year for doing so, assuming you sign-on with one of the several apps that connect would-be drivers with car owners that don't always need access to their automobile.
The idea isn't without its obvious risks and worries. First, your insurance company may or may not like the idea of covering a vehicle being regularly driven by a variety of people for commercial reasons even though these other drivers are supposed to be insured. So, be sure to discuss the matter with a qualified insurance agent first. It also puts wear and tear on your automobile that wouldn't otherwise chip away at its resale value. Think carefully before taking this plunge.
If you're comfortable with the terms being offered by a reputable peer-to-peer car rental platform though, there's money to be made with the strange business model.
