Retirement is a time to reconfigure your financial life. In this final life transition, you need to figure out how to obtain the funds that will carry you through. Here, then, are five suggestions from our analysts about how you can enhance your earning potential in the twilight years.
Sean Williams: So you want an income boost in retirement? I have a simple solution: Cut your expenses.
Now, I know what you're thinking: "It's my retirement, and I should be able to continue to spend how I want!" And you know what? I don't disagree with that one bit.
You've worked hard, and you've earned the right to retire on your own terms. But making a smart decision on where to retire can make a world of difference to your bottom line.
There are 50 states to choose from in the U.S., and they all offer something different for retirees. Some cater to seniors' social needs, their desires to live away from big cities, or perhaps their want of tropical weather (looking at you, Floridians).
But the key factors seniors must be aware of concern how the state that they're retiring in taxes retirement benefits, such as Social Security. Currently, 13 states in the U.S. tax Social Security benefits, although nine of them offer an exemption up to a certain income level. If you live in any of these states, you could be at a retirement disadvantage.
Also, property, state, and local taxes can have a bearing on your pocketbook. For example, the Tax Foundation pointed out in July that five states have no state tax rate (and of those five, only Alaska has a local tax), meaning residents there get to keep more of their money when buying goods and services.
Likewise, property taxes on your dream retirement home can vary wildly from state to state. You'll pay an average of 2.38% in property taxes on a home in New Jersey, the highest in the country per the Tax Foundation, while sunny Hawaii has the lowest average property tax rate in the country at just 0.28%.
Long story short -- where you live can make a big difference.
Selena Maranjian: One way to boost your income during retirement is a bit of a drastic one, but it can be quite effective: get a reverse mortgage. Many retirees have considerable equity in their homes. They can take out a home equity loan, but that leaves them on the hook for repayments. Another option is the reverse mortgage, where the amount borrowed doesn't have to be repaid during your lifetime. Upon your death, your home can be sold to cover the debt -- or your heirs can pay it off and keep the home. The loan is also due soon if you move out of the home -- such as into a nursing home.
Learn a lot more about a reverse mortgage before signing up for one. For example, while living in your home with the money you received from the reverse mortgage, you'll still be on the hook for expenses such as property taxes, home insurance, home repairs, and maintenance. Know, too, that the amount you can borrow depends on a bunch of factors, such as how much longer you (and your spouse, if you have one) are expected to live, the value of the house, the equity you have in the house, and prevailing interest rates.
Interest charges are added to the balance of the loan over time. The money you get with a reverse mortgage comes in the form of a monthly payment, a lump sum, or a line of credit.
Brian Stoffel: Much has been made about Americans' general inability to save enough money for a comfortable retirement -- so it should be no surprise that many are looking for ways to supplement their incomes during their Golden Years.
What's far less appreciated, however, is the thing that current retirees claim is the most difficult part of adjusting to retirement. According to a Merrill Lynch/Age Wave survey in 2014, those who are preparing to retire claim that a loss of reliable income in retirement is their greatest concern.
But by a factor of two-to-one, the loss of social connections was cited as the most difficult obstacle for those already in retirement -- as opposed to the loss of reliable cash flow. This clearly shows that there's a disconnect between what we think we'll miss, and what we actually do.
Instead of waiting to discover this lesson the tough way, take action. By getting a relatively stress-free, part-time job, retirees can kill two birds with one stone. Staying active in retirement is key to enjoying your Golden Years, and if you can get paid to do it, why pass up that opportunity?
Jason Hall: Brian is absolutely right that post-retirement work is a great way for retirees to generate income, as well as stay socially active. Unfortunately, it also makes you beholden to someone else's whims when it comes to scheduling, and you may have to give up more flexibility and time than you want to. Conversely, you may not be able to get enough income to meet your needs with part-time work.
If you're in this situation, and you have some special expertise, skill, or training, you may be able to leverage your experience and skills in other ways. This could include consulting, providing training, or even teaching a college-level course.
There are also lots of other small businesses that can be great for retirees, including pet walking/sitting and providing in-home care to older retirees, that may give you more flexibility than the prototypical Wal-Mart greeter job many associate with part-time retirement work.
The point is, don't assume that you'll have to punch a clock to draw income. You spent decades working, and probably built up some valuable skills. Think about how you can use those skills to pad your pocket in retirement.
Eric Volkman: Invest in dividend-paying stocks! These securities -- the right ones, anyway -- are the ultimate set-it-and-forget-it investments. As such, they're perfect for seniors, allowing them to concentrate on their leisure time while spitting out returns on a regular basis.
The market has a great many dividend payers, and as such, it can be daunting to find steady and reliable candidates. A great place to look initially is the list of dividend aristocrats, those rare and special companies that have raised their payouts at least once annually for a minimum of 25 years running. This is a difficult feat to pull off, to say the least, so the list is not very long.
It contains some of the best companies money can buy, however. These enterprises are proven winners, and nearly always turn enough of a profit to both reward shareholders and continue to grow their businesses. Many of the aristocrats pay out at relatively high rates; for instance, the dividend yield (i.e., payout as a percentage of stock price) on engineering powerhouse 3M is currently 2.9% compared to the average yield of the S&P 500 index, which stands at around 2.1% just now.