There are plenty of good reasons to get excited for retirement to arrive. Not only might it be nice to not have to work every day, but you may have a host of activities you're eager to embark on. Retirement could also be an opportunity to spend more time with the people you love and see parts of the world you never knew existed.
To pull off your dream retirement, though, you need money. How much money? That depends on you and you alone, as every retiree's bills and income needs are different. But if you're hoping to get yourself up with more income for your senior years, here are some strategies worth looking into.
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1. Delay Social Security for larger monthly checks
Social Security might be one of your most substantial retirement income streams. Once you turn 62, you can sign up to start getting those monthly benefits at any time. And if you wait until full retirement age to file for Social Security, which is 67 for anyone born in 1960 or later, you'll get your monthly benefits without a reduction.
But you may want to hold off on filing a bit longer than that. For each year you delay your Social Security claim past full retirement age, your benefits get an 8% boost.
This incentive runs out once you turn 70. But depending on your full retirement age, you have an opportunity to boost your monthly Social Security checks by at least 24% -- for life -- if you can wait until your 70th birthday to file.
2. Continue to take on some risk in your portfolio
Many retirees opt to scale back heavily on stocks to reduce the overall risk profile of their portfolio. That's not a bad idea in general. But if you take it to too much of an extreme, you risk losing out on retirement income you might otherwise enjoy.
You may want to continue to hold some growth stocks in your portfolio for the returns they're capable of producing. At the same time, it's a good idea to hedge those growth stocks with dividend stocks.
Dividend stocks, by nature, tend to be less volatile. And the income they pay regularly is money you can either spend during retirement or reinvest so your portfolio continues to grow.
If you like the idea of portfolio income, also look at real estate investment trusts, or REITs. They're required to pay at least 90% of their taxable income as dividends to shareholders. Plus, with REITs, you're branching out into a different corner of the market, which gives you nice diversification.
3. Choose municipal bonds for the steady income and tax benefits
The assets you hold in retirement shouldn't all be loaded with risk. If you want a fairly safe way to boost your senior income, consider municipal bonds.
Historically speaking, municipal bonds have a fairly low default rate because these bonds are largely backed by the full faith and credit of their issuers. And one really nice feature of municipal bonds is that the interest they pay is always exempt from federal taxes. If you buy municipal bonds issued by your state of residence, you can also enjoy tax-free income at the state and local level.
The more income you have coming your way in retirement, the more likely you are to enjoy the lifestyle you've always dreamed of. If you like the sound of that, hold off on claiming Social Security until you turn 70, invest in income-producing stocks and REITs, and load up on municipal bonds so you can collect steady interest payments without having to worry about the IRS coming after that money.
