Running out of money in retirement is a major concern for those approaching that milestone, and that includes folks who have saved substantially. If you're concerned about depleting your nest egg too quickly, you should know that there are several steps you can take to boost your retirement income and buy yourself some much-needed peace of mind. Here are just a few options you might explore.
1. Save in a Roth IRA
Many savers opt for traditional IRAs over Roth accounts during their working years because with the former, you get an immediate tax break for making contributions, and with the latter, you don't. But one major benefit of housing your savings in a Roth IRA is that withdrawals are taken tax-free, which means that whatever sum you carry into retirement is yours to use in full. Traditional IRA withdrawals, by contrast, are taxed as ordinary income, which means you're paying your highest possible tax rate on them.
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2. Delay Social Security
Though your Social Security benefits are based on your earnings record (specifically, your top 35 working years), the age at which you file for them can affect your payout each month. If you file for benefits at your full retirement age, you'll get the full monthly benefit your work history entitles you to. But if you delay benefits past full retirement age, you'll snag an 8% boost for each year you wait, up until you turn 70. That means if you're looking at a full retirement age of 67, which is the case if you were born in 1960 or later, and hold off on filing until you turn 70, you'll get a 24% benefits increase -- for life.
3. Invest in municipal bonds
Filling your portfolio with bonds is another good way to boost your retirement income. If all goes well, meaning your bond issuers don't run into financial trouble and default on their obligations, you can look forward to interest payments twice a year that can serve as a source of cash when you need it. But if you invest in municipal bonds -- those issued by cities, states, and other localities -- as opposed to corporate ones, those interest payments will be yours free and clear of federal taxes. And if you buy municipal bonds issued by your home state, you'll avoid state and local taxes to boot.
4. Load up on dividend stocks
Though stocks are a riskier investment for seniors than bonds, they still have a place in your retirement portfolio. And if you acquire some dividend stocks, you'll have yet another means of generating extra income. Similar to bonds, which pay interest, dividend stocks typically make quarterly payments to investors, which means that if you retain them, you can look forward to a steady stream of income. Another great thing about dividend stocks is that even when the stock market on a whole is doing poorly, if you invest in strong enough companies, you'll still have that added income to look forward to, which can help offset other losses you might take in your portfolio.
5. Monetize your hobbies
Many seniors choose to work part-time in retirement to generate more cash. But if the idea of bagging groceries or going back to a desk job doesn't appeal to you, especially after a lifetime of hard work, then a better idea is to turn the things you enjoy doing with your time into a viable income stream. There's a host of hobbies you can monetize as a senior, whether it's gardening, baking, knitting, or crafting, and while going this route may not make you rich, it could serve as a painless way to supplement your income.
Even if you're going into retirement with a healthy amount of savings, it never hurts to take steps to boost your income even more. If anything, it'll help alleviate some of your financial worries so you're able to enjoy your golden years to the fullest, like you deserve.
