Have you been crunching the numbers and can't quite figure out how you're going to make ends meet after you retire? If you have, you're not alone -- the majority of Americans are woefully underprepared for retirement.
The good news is that there are several moves you could make in order to boost your retirement income. Aside from the obvious ways (like "get a job"), here are seven ways you could boost your retirement income stream and enjoy a better quality of life.
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1. Wait to claim Social Security -- even if it's just for a few months
It's a well-known fact that if you delay Social Security, say, until age 70, your benefit checks will be much higher. That's good news for people who can afford to wait that long, but the reality is that most retirees need their Social Security income well before 70. Just 4% of retirees wait this long, and there are some good reasons for it.
However, many people don't realize that you get monthly Social Security increases for delaying retirement. In other words, if your full retirement age is 66 and you wait until 66 years and one month, your benefit will get a little higher. Specifically, delayed retirement credit adds 2/3% to your benefit per month.
For example, if your Social Security benefit at full retirement age would be $1,800 and you can wait just three months to claim, your benefit will be increased to $1,836. This may not sound like much, but it means an extra $432 in annual income, which could certainly make a difference.
2. If you're at the peak of your earning power, it can really pay to wait
Social Security benefits are based on your highest 35 years of earnings (inflation-adjusted). Because of this, if your earnings have steadily increased throughout your career, choosing to wait for a few years can help boost your base Social Security benefit on top of the effect of delayed retirement. Plus, if you can deal with working for another year or two, that gives you more time to aggressively save in your 401(k), IRA, or other retirement plan.
3. A reverse mortgage can boost your income
If you're over 62 years old and have a good amount of equity in your home, a reverse mortgage could provide you with a nice stream of income. Essentially, you receive payments from a lender -- monthly, lump sum, or a line of credit -- in exchange for the equity in your home.
Reverse mortgages typically don't have to be paid back until after you die or you sell the home. These loans are not for everyone and tend to have high fees, so be sure that you know what you're getting into first.
4. Take advantage of catch-up contributions
Your preretirement years are the best time to aggressively save money in your retirement accounts. In fact, the IRS allows savers over 50 to contribute more to their retirement accounts than everyone else.
To name two of the most common types of accounts, the maximum IRA contribution if you're 50 or older rises from $5,500 to $6,500 per year, and that extra $1,000 can certainly make a difference. The 401(k) catch-up provision is even more generous, as the annual maximum for elective deferrals rises by $6,000 -- from $18,000 to $24,000 -- after your 50th birthday.
5. Aggressively pay down your debts
This isn't necessarily a way to boost your retirement income, but the less monthly obligations you have in retirement, the further your income will be able to go.
Therefore, one smart strategy many retirees use is to aggressively pay down debts such as a mortgage or car loan, with the goal of paying off the balance(s) entirely before retiring. In other words, a $4,000 monthly income in retirement may not sound like much if you're paying a $1,500 mortgage and two $400 car payments, but it could be more than enough if your major debts are paid.
6. Move to a low-tax state
Clearly, this isn't an option for everyone. For example, if all of your friends and family are in a certain state, it may sound silly to move somewhere else just to save some money on your taxes.
Having said that, many retirees are willing to relocate, and it's important to realize that there can be a big difference in taxes from one state to another. This is especially true in retirement, as some states impose taxes on Social Security benefits and other types of retirement income, while others don't. Living in a tax-friendly state could make a big difference in your qualify of life after you retire.
7. Rent your home or part of it
This tip can be of particular help to empty nesters who still have a relatively large home and retirees who own a second home. Renting out a room in your home or an unused second home on either a short- or long-term basis can certainly put some extra cash in your pocket. And with new platforms like Airbnb, renting a room or your entire house can be rather easy.
In fact, the average Airbnb host earns $924 per month, and this number could be significantly higher in your case if you have an entire home to rent or you live in a popular area for travelers.
The Foolish bottom line
As I mentioned, getting a part-time job would certainly generate extra retirement income, but not every senior citizen is willing to or is physically able to work. Besides, is "Get a job" really a form of retirement advice?
The takeaway here is that there are other options, besides continuing to work, that could add more money to your retirement income, so if you aren't sure you'll have enough, one or more of these might be worth considering.
