Are you worried you may not have enough retirement income to live on when that time finally comes? That's understandable, since Social Security only replaces, on average, about 40% of your work-based wages, according to the Social Security Administration.
Meanwhile, mutual fund company Vanguard reports that while the average size of 401(k) retirement accounts of the 65+ crowd currently stands at just under $280,000, that number is skewed sharply higher. The median figure (the number right in the middle of all of the average's underlying data points) is actually a little less than $88,000, which means half of all these accounts are worth less than $88,000. Either way, both of these numbers could prove limiting in terms of generating spendable income in retirement.
Fortunately, you have options. Assuming you're going to do the obvious things -- like owning dividend-paying stocks, interest-paying bonds, and certificates of deposits (CDs) -- and maximize any annuity or pension payments you're due, here's a closer look at three ways of generating retirement income you may not have yet considered.
1. Continue working
Just because you're retired from the full-time employment you had during the prime of your career doesn't mean you can't continue working in any capacity. Your current employer may still want to keep you around because of your valuable experience. Or perhaps another employer is interested in hiring you for your insight. Flexible part-time employment is also an option.
There may be a bit of a catch for some people who wish to work in retirement. If you initiate your Social Security benefits before you've reached full retirement age (between 66 and 67 years old, depending on the year in which you were born), earning work-based income could lead to a reduction in your monthly Social Security payments. For this year, the Social Security Administration will deduct $1 from your annual benefits for every $2 you earn above $21,240 if you'll be under full retirement age all year. For those hitting their full retirement age at some point in 2023, the limit is $56,520, and the deduction is $1 from annual benefits for every $3 above the limit. Those limits is raised on a regular basis.
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It's not the end of the world if it happens. After all, you're still making money. The Social Security Administration also gives you credit for any such reduction, raising your future benefits payments, as a result.
But what if you've already reached your full retirement age? Then you can work as much as you'd like without any risk of reducing your monthly Social Security payments.
2. Renting out your unused real estate
Do you own more than one home? Maybe you have a massive multicar garage or land that's not being used for anything? If so, these are monetizable assets.
There are several ways to make this happen. It's possible to attract would-be tenants using conventional advertising approaches. If you've got a house in a vacation destination that you'd be willing to rent out, platforms like VRBO and Airbnb might be a more effective option. Or if you own a lot of land or a warehouse-sized building, you may be able to rent them to owners of boats or RVs.
If you don't want to become an active landlord, there are rental companies that can handle all this work for a nominal fee.
3. Turn your hobby into a business
Finally (and maybe most plausible), consider turning your hobby into a money-making business.
There are several obvious ways of doing this, including selling artwork or handcrafts, or giving lessons that teach your skill to others. There are even more unusual ways to turn your hobby into a small business, however, that could prove even more lucrative.
Several woodworkers make more money with their YouTube channels than they do by making things out of wood. Some "Hot Wheels" collectors are willing to pay surprisingly big money for well-customized, one-of-a-kind versions of the tiny metal toy cars. Even certain blogs are still doing well these days. The key is to stand out by differentiating yourself.
Turning your hobby into a business takes a little bit of business acumen. For instance, consider the cost of materials needed to make your product and how much time is required. If you're doing something online, it helps to understand that your goal is to draw as much web traffic as possible to a blog post or video, since the number of views ultimately determines how much money a post or video earns. It also takes time -- maybe even a lot of time -- to build enough of an online presence to make the effort worthwhile.
The web remains a lucrative opportunity, though, for anyone with something unique to offer.
