Most people have a few common income sources in mind when they think of retirement. Sources like Social Security, pension plans, and savings accounts are the usual ways people in retirement receive income. Social Security is a federal program that provides a monthly income to eligible individuals who have reached retirement age. The amount distributed from Social Security can vary depending on how many years a person has worked, how much they made, and at what age they choose to retire.
Other sources of retirement income are likely more beneficial for many people, such as pension plans and savings accounts like IRAs and 401(k) plans. Some employers and government agencies offer pension plans, which provide a guaranteed income for life to eligible employees. In most cases, the employee must have worked for most of their life to receive these benefits, and they are becoming uncommon in many fields. Individual Retirement Accounts (IRAs) and 401(k) plans are types of retirement savings plans that allow individuals to save money on a tax-deferred basis, with many employers offering 401(k) plans and contribution matching as a benefit to employees.
Many people who are retired or who are retiring soon are looking away from these established forms of income as they are less confident in the government and their employers’ ability to support them, they cannot find pension plans, because they do not provide enough income, or for other reasons. Many people are turning to sites like https://www.myretirementpaycheck.org/ to help them understand their retirement funds and better ways to support themselves. Here are some of the less traditional sources of retirement income that are becoming more common:
Dividends and Investment Interest
Interest from stocks, bonds, and other investments can provide a source of retirement income. While some retirees will not be in a position to purchase a lot of new income-producing assets at retirement age, some already have these investments and as they age, they continue to become more valuable. For other people, investing in stocks is the perfect option when they get some extra money, such as from selling a home, or unneeded vehicles, or when receiving an inheritance.
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Rental Income
Owning rental property can provide a steady stream of income in retirement. Many retirees have owned their own homes for years and have paid off their mortgages, making their homes one of their greatest assets. This equity can be used either to purchase rental properties, or their own home can be rented out while they move into a smaller home or retirement community. Another option for retirees to break into the rental market is by becoming snowbirds for part of the year and renting out their homes to short-term renters, such as traveling nurses, while they are away.
Reverse Mortgages
These are loans that allow individuals to convert the equity in their homes into cash, which can be used for retirement income. With these loans, the bank or other lender makes regular monthly payments to the owner. Some reverse mortgages include a line of credit rather than monthly payments. At the end of the owner’s life or when they move out of the home, the loan has to be repaid (with interest).
Home Equity Loans
Similar to reverse mortgages, these loans allow individuals to borrow against the equity in their homes to generate cash flow. In these cases, the loans are usually set up as lines of credit that can be used as needed and paid back in monthly payments similar to credit card payments.
Part-Time Work
Some retirees choose to work part-time in order to supplement their retirement income. Part-time work might be something unrelated to the retiree’s original career, or it may involve something that relies on their valuable experience. Part-time work for retirees often takes the form of consulting or substitute positions related to their degree or career, such as substitute teaching, stepping in at their old workplace when there is a staffing shortage, or consulting at an office or other firm. Other retirees choose part-time work that is relaxing or enjoyable for them, such as helping at a local library or welcome center.
Remote Work
Remote or at-home work is the ideal option for some retirees who wish to work from anywhere while traveling or become snowbirds. For retirees that have career experience in areas that easily transfer to online or remote situations, such as customer service, tech work, writing, or data processing, this can be a perfect option. For others, a job that is closely related to their original field of work is a better choice. For example, a retired teacher might find part-time work as an online tutor, and a retired nurse or doctor might find an enjoyable job in telemedicine or as a consultant.
Starting a Business
Some retirees choose to start a business in order to generate income in retirement. For many, this business is a natural extension of the work they have always done- they already have experience, word-of-mouth for advertising, and in some cases, clients. For other retirees, starting a business is a lifelong dream that they couldn’t realize until they had the freedom found in retirement.
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Renting Out a Room
Renting out a room in their home can provide additional income for retirees. Many retired people live in large homes with many empty bedrooms and no longer use the extra space. In fact, it can become a burden to care for a large home. Renting empty bedrooms or a basement space can be a great solution. It can provide companionship, income, and help around the house. Like all investors or property managers, retirees should choose potential tenants very carefully. In this case, where they will be sharing their home with their tenants, they should be extra cautious.
Peer-to-Peer Lending
Some retirees choose to lend money to others through peer-to-peer lending platforms. For those retirees with a bit of extra money, this can be a good way to invest. Some of the advantages include higher-than-normal interest rates and the ability to choose the level of risk and the length of loans you are comfortable with. Peer-to-peer lending is also available to people with insufficient capital for other investment strategies.
Online Marketplaces
Some retirees sell goods and services through online marketplaces or at local craft fairs, farmer’s markets, and flea markets. These are great avenues for retirees to make a little extra income to supplement their other, more reliable, income sources. Many retired people enjoy hobbies like crafting, art, photography, and woodworking, and these online and local platforms allow them to make income from these hobbies.
Participating in the Sharing Economy
Some retirees choose to participate in the sharing economy by renting out their cars, home, or other assets. Renting extra homes, rooms, vehicles, or even RVs and boats can be a good way to add supplemental income without taking on much risk. Other options include renting storage space such as a garage or shed.
Retirement Community Income
Some retirement communities offer additional income opportunities, such as working as a resident assistant or leading recreational activities. For those retired people who live in retirement communities, either full-time or during part of the year in the case of snowbirds, this can be a fun way to get a little extra income while staying connected to their community. Even those who don’t live in a retirement community can often find work in similar areas such as helping with activities at a retirement center in their town or helping with work in their church, local library, senior center, or soup kitchen.