Unless you have a fat pension that's set to pay you enough to live on comfortably in retirement, you're likely to need plenty of income in retirement. Social Security will probably provide some of that, but its average retirement benefit was recently $16,000 per year, which will leave most folks wanting or needing more.
Here are some tips to help you boost your retirement income.
This is an obvious one, of course. Much of your retirement income will be determined by how much you managed to sock away while working. If you're saving $500 per month, could you swing $700? If you're plowing $1,000 into your retirement accounts each month, could you find some ways to cut costs and direct even more into those accounts? Even if you only have a decade left until retirement, it can make a big difference. Saving $10,000 per year for 10 years in an account that grows by 8% annually will yield about $156,000. If you can sock away $12,000 annually, you'll end up with far more -- close to $188,000.
This income-boosting strategy may not be welcome, but it can be quite effective: Work longer. If you're able to work, say, two more years than you originally planned to, it can benefit you in several ways: You'll be able to add two more years' worth of savings into your retirement accounts, and you won't be depleting those accounts in those two years, either. If your employer offers health insurance, you can enjoy the continuation of that coverage for two more years. And you may also increase the ultimate size of your Social Security checks by increasing the number of years of earnings they're based on (your 35 top-earning years are counted) or by replacing a lower-earning (inflation-adjusted) year with a higher-earning one.
Hold dividend-paying stocks
You can generate income in retirement by selling off shares of stock from your stock portfolio over time, but with dividend-paying stocks, you can collect income without having to sell any shares. A $300,000 portfolio, for example, that sports an overall average yield of 4% will generate about $12,000 per year -- a solid $1,000 per month. Dividend income isn't guaranteed, but if you spread your money across a handful of established blue-chip companies, you're likely to receive regular -- and growing -- payments. A dividend-focused exchange-traded fund (ETF) can be a fine option, too. The iShares Select Dividend ETF, for example, recently yielded more than 3% and sports a relatively low expense ratio (annual fee) of 0.39%.
Get a job
Yes, retirement is typically when people stop working. Still, you might want to consider holding a part-time job in your early retirement years. This can boost your income and help you not tap your retirement accounts quite as heavily for a while. It can also offer benefits such as adding some structure to your suddenly free days and opportunities for socializing. Many retirees find themselves restless and a bit lonely in retirement, and a low-stress job on the side can contribute to your happiness.
Consider a reverse mortgage
A reverse mortgage, where a lender provides (often tax-free) income during your retirement with the loan not needing to be paid back until you no longer live in your home, is worth considering, too. It has some drawbacks, such as requiring your heirs to sell your home unless they can afford to pay off the loan, but if you're really pinched for funds, and no one is counting on inheriting your home, it can be a solid solution. Learn a lot more about them before getting one.
Borrow against your life insurance policy
Consider this strategy if you have a life insurance policy no one is depending on -- such as if the children you meant to protect with it are now grown and independent. This can work if you've bought "permanent" insurance such as whole life or universal life, and not term life insurance, which generally only lasts as long as you're paying for it. You'll be reducing or wiping out the value of the policy with your withdrawal(s), but if no one really needs the ultimate payout, it can be worth it. Plus, the income is typically tax-free!
Maximize your Social Security
Finally, spend some time looking into Social Security strategies that will help you collect as much as possible from the program. For example, for every year beyond your full retirement age that you delay, your benefits will grow by about 8%. Delay from age 67 to 70, and you'll boost your benefits by 24%. It's not quite as powerful as it seems, though, because while your checks will be bigger, you'll be collecting fewer of them. When you start collecting won't actually make much difference if you live an average-length life, but if you think you may live a long time, bigger checks can be quite welcome. Read up on spousal strategies, too, because coordinating when you and your other half start collecting can benefit you both.
These are just a handful of many ways to boost your income in retirement. A little time spent thinking about and planning strategies can pay off handsomely in retirement.
Longtime Fool specialist Selena Maranjian, whom you can follow on Twitter, owns no shares of any company mentioned in this article. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.