Like most of us, we tend to have only one major source of income, namely our employment. Managing finances during retirement can be challenging especially if you are on a tight budget. However, to maximize your benefits and turn your finances to your advantage, you must know the different sources of retirement income.
Here are major sources of income during retirement:
Nearly all Americans, upon retiring, will receive monthly payments from the Social Security Administration and these payments are guaranteed to keep up with inflation. The longer you wait to sign up between ages 62 and 70, the higher your monthly payments will be.
Just remember that there are certain social security basics that you need to know before you apply for retirement benefits.
Almost half of Americans expect to fund their retirement with a 401(k), IRA, Keogh, or other types of retirement account. However, only 22 percent of retirees consider retirement account withdrawals to be one of their major sources of retirement income.
The 401(k) program is usually the best place to start saving and investing for most people. A 401(k) is usually offered by a for-profit company, while teachers and other employees of nonprofits may be offered a 403(b) instead.
A Stock is a type of security that signifies ownership in a corporation and represents a claim on the part of a corporation’s assets and earnings.
In stock investing, age and circumstance matter in building a good portfolio. Since retirees need an income, an ideal portfolio for them would be a diversified mix of strong companies that gives generous dividends.
If you can access your home equity, it can save you from running short of money or being forced to sell other investments. It can somehow improve a retiree’s cash flow especially to those who don’t have a pension and are only relying on withdrawals from their savings.
Some ways to do this are downsizing your house, renting a spare room of your house, borrow against equity, and reverse mortgage.
Getting a part-time job in retirement may become necessary for workers who were not able to save enough. Some 18 percent of employees think they will work part time in retirement.
Part-time employment usually has fewer than 30-35 hours of work per week. However, it doesn’t usually offer the benefits one can get from a full-time job.
All or part of a property that is acquired upon a death of an individual, typically a cash endowment given to younger heirs of the deceased, however, any assets can be considered as part of the inheritance, such as stock certificates or real estate.
About 9 percent of working Americans expect a significant amount of wealth to be willed to them.
Annuities or Insurance
Annuities are financial products that accept and grow funds to pay out a stream of payments or income at a later point in time.
Insurance is a financial product of compensation in which an individual or entity would receive financial protection or reimbursement from an insurance company against potential future losses in return for premiums that have to be paid.
Looking for income to sustain your needs during retirement might not be that easy especially since you are aging. In addition to these sources of income, there are also other ways where you can make money post retirement which can also keep you busy and keep boredom at bay.