If you're worried about having enough money in retirement, you're not alone. Many workers fear that once their golden years arrive, they'll struggle to afford the many costs seniors face today. But if you make the following moves, you can secure a solid stream of income that'll make retirement less stressful and more enjoyable.
1. Delay Social Security
Your Social Security benefits are calculated based on your 35 highest years of wages, and you're entitled to those monthly benefits in full once you reach full retirement age. That age is either 66, 67, or 66 and a certain number of months, depending on your year of birth. That said, you have the option to delay benefits past full retirement age, and in doing so, you'll increase them by 8% a year up until you turn 70.
Not everyone can afford to delay Social Security, and in some cases, it doesn't make sense. For example, if you're in poor health, holding off on claiming benefits could actually cause you to lose out on lifetime income. But if your health is excellent and you're able to work longer, delaying Social Security could eventually put more money into your pocket for life.
2. Fund a Roth retirement plan
Saving for your later years in any type of tax-advantaged retirement plan can help ensure that you have enough money to pay your bills as a senior. But if you want to get even more from your savings in retirement, fund a Roth IRA or 401(k). In doing so, you'll lose the up-front tax break you get when you contribute to a traditional retirement plan, but you'll gain the benefit of tax-free withdrawals as a senior.
Imagine you manage to retire with $500,000 in savings. With a traditional IRA or 401(k), you'll owe the IRS a portion of each withdrawal you take. But if you save in a Roth account, that $500,000 is yours free and clear of taxes.
3. Load up on municipal bonds
Bonds are a fairly reliable retirement income stream, since they pay interest twice a year. But when you collect interest from corporate bonds, you pay taxes on that income. That's why municipal bonds are a great choice for retirees.
Municipal bond interest is always tax-exempt at the federal level, and if you buy bonds issued by your home state, you'll avoid state and local taxes as well. Municipal bonds also have historically low default rates, which makes them a relatively safe investment. Of course, there are still risks involved in buying municipal bonds, and it's important to check your issuers' credit ratings before moving forward. But generally speaking, your chances of not getting the interest payments you're entitled to are fairly low.
4. Start a business
Many people associate retirement with not being able to work. But if your health is good enough, there's no reason you can't earn some type of income later in life. In fact, retirement is actually a great time to start a business. That way, you can spend your days doing something meaningful, while boosting your income and alleviating some of the financial concerns you might otherwise face. And the busier that venture keeps you, the less money you're apt to spend on entertainment.
You need money to fund and enjoy your retirement, and the more you have, the better. Securing a reliable income stream will help you to make the best of this stage in your life without living in fear of mounting bills.