Retirement is a time when all the dreams you've put off until the future finally have a chance of coming true. However, to realize those dreams, you have to have the financial resources necessary to achieve them. Making the most of your work is the ultimate key to the size of your nest egg, but there are also some other things you can do to stretch your retirement dollars further and open up new opportunities for income. Let's take a look at three of them.
Be a smart investor
The key decision that you'll need to make when you retire is how to position your investments for the rest of your life. Many retirees look to take away all stock market risk by getting out of stocks entirely, relying instead on bank CDs and other fixed-income investments to provide them with the income they need to cover basic living expenses.
There are several problems with that strategy. First, it doesn't give you the opportunity to grow your retirement nest egg. Second, with interest rates as low as they are currently, most retirees have found that they have to eat into principal more quickly than they had anticipated because the income their investments generate is insufficient to meet their needs. And finally, for those who want to leave behind a legacy for their loved ones, it's hard for an investment portfolio to withstand the need for constant withdrawals and a lack of opportunities for price appreciation.
Adding too much risk to your portfolio doesn't make sense in retirement, but neither does have no risk at all. The right balance will make your money go much further.
Make the most of Social Security
The other financial resource that nearly all Americans have in retirement in Social Security. First available at 62, you have the ability to choose when you start taking benefits, and your monthly payment will differ depending on your chosen start date. Decide to take your benefits at your first available opportunity, and you'll get $0.75 on the dollar for your calculated primary insurance amount. Take benefits at full retirement age, which is currently 66, and you'll get your full primary insurance amount. Wait until 70, and you'll get $1.32 on the dollar because of delayed retirement credits.
The later you wait, the higher your monthly payment will be, but that comes at the expense of having to give up those early payments entirely. The right decision will depend on your personal circumstances, but being mindful of the many factors involved will help you make a choice that produces the biggest supplement to your retirement income at the time when it's most important to you.
Look at a reverse mortgage
Many retirees find that they have huge amounts of equity in their homes but no convenient way to tap into it. The most obvious thing to do is to sell your home, but that's not something that every retiree will be comfortable doing. For those who want to stay in their homes, a reverse mortgage can let you tap into equity efficiently and predictably.
Reverse mortgages can be structured to provide either a fixed stream of income or access to a line of credit that you can draw on at will. You won't have to pay back the loan until you leave your home, and if the amount outstanding on the loan exceeds the proceeds from the sale, then the retiree borrower won't be on the hook for the difference. Fees can be substantial, but for many, the certainty of the reverse mortgage framework is worth the hassle and expense.
Coming up with retiree income is hard, but these three methods can get you more money you can use in retirement. Take a closer look and see which mix of these ideas will work best for your situation.
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