Best Ways To Save: June 2015

Best Ways To Save: June 2015

5 Ways To Make Extra Income In Retirement

Retirees who depend on Social Security and live on a fixed income need to budget carefully. Here are 5 ways to bring in extra cash in retirement:

Boost your Social Security income. If you haven’t started retirement benefits, you can boost the amount you receive as much as 32% by delaying benefits until age 70. That can add a considerable sum of cash over the course of a retirement. A person entitled to $1,500 at a full retirement age of 66 and who lives until 95, would receive $62,226 more if he or she waits until age 70 to start benefits.

Keep working. If you are at your full retirement age, or you haven’t started benefits yet, keep working. To determine your benefits, Social Security uses your 35 years of highest earnings. After indexing for growth in wages, your average monthly earnings are determined and the rest of the benefit formula is applied to determine the “primary insurance amount.” Any gaps in your work record drag down your average monthly earnings, so extra years of work now will help fill the gap. In addition, if your earnings today are some of your highest, this helps boost your average monthly wage amount, and your benefit. The Social Security Administration continues to recalculate your benefit as you add years of earnings.

Be careful about starting benefits and working. If you are under full retirement age, earnings from work could trigger the Social Security “earnings test.” Working beneficiaries who are younger than full retirement age all year may earn $15,720 in 2015 or $1,310 per month without reduction. If you earn more, the Social Security Administration will reduce benefits $1 for every $2 in excess of the exemption amount. Once you attain your full retirement age you may earn as much as you want without reductions to your benefits for excess earnings.

Sell collectibles and extra stuff, including the extra car.  Getting the most for your collectibles depends a lot on what you have to sell and the amount of time and effort you want to spend selling it. Items you sell online like eBay should be small enough to lift and ship cost-effectively. If you have rare or valuable antiques, or heavy furniture, or a household of goods to liquidate in a short period of time, you may be better off selling it at an auction. Finding the right auction house for your items can help you get the highest price, because good auction houses frequently have established a base of dealers and collectors who frequently attend their auctions. Selling directly to a local dealer or estate sale company will net you about 30% to 50% of what the company estimates it will go for. Consignment shops typically take about 50% of the final price. Downsizing to just one car and selling the extra can also save on car payments, maintenance, insurance and property taxes.

Turn proceeds from savings or the sale of a home into a paycheck for life. You can turn a portion of your savings into a regular paycheck by purchasing an immediate annuity. Immediate annuities are purchased in a single lump sum from an insurance company. In return the insurance company promises to pay you monthly retirement income for the rest of your life, no matter how long you live. You can choose annuities that provide survivor benefits for a spouse or partner. Annuities can provide higher interest rates that are generally higher than CD or Treasury rates. The big tradeoff is that you give up control of your right to demand the return of your original lump sum premium and flexibility to tap those savings. In addition, you should spend time carefully shopping and comparing all annuity products before making a decision. Some come with high costs that significantly reduce your payout. Seek unbiased financial counseling before making this decision.

For retirement income that may be needed 30 years or more, there’s no one simple or single answer for everyone — you undoubtedly will benefit from using multiple strategies. Seek good financial, tax or legal counseling before making any big decision!