Money After Your Retirement

Money After Your Retirement

Millions of Americans are worried about retirement. Fully 23% of workers are not too confident or not confident at all that they (and their spouses) will have enough money to live comfortably throughout retirement, per the 2019 Retirement Confidence Survey -- which also noted that 40% of workers have saved less than $25,000 for retirement. Yikes.

Fortunately, if you're one of those folks in a financially precarious position, there are ways to beef up your retirement income via actions you can take now and/or later. 

No.1 Many cards these days are charging rates in the high teens, with plenty charging 20% to 25%, and sometimes even more. If you're carrying $12,000 in credit card debt from year to year and are being charged 20% interest, that's $3,000 in interest payments up in smoke every year. That's especially bad in retirement, so aim to enter retirement with as little debt as possible -- and know that you can pay off debt even if you're weighed down with a lot.

No. 2: You can see how powerful it can be to go from investing, say, $1,000 per month to $1,200 or $1,500 per month.

Growing at 8% for

Investing $1,000 Per Month or $12,000 Per Year

Investing $1,200 Per Month or $14,400 Per Year

Investing $1,500 Per Month or $18,000 Per Year

years

$42,073

$50,488

$63,110

5 years

$76,031

$91,237

$114,047

10 years

$187,746

$225,295

$281,619

12 years

$245,944

$295,132

$368,915

15 years

$351,891

$422,270

$527,837

20 years

$593,075

$711,690

$889,613

Source: Calculations by author.

No. 3: The table above also reflects the power of time. 

Growing at 8% for

$10,000 invested annually

20 years

$494,229

21 years

$544,568

22 years

$598,933

23 years

$657,648

24 years

$721,059

25 years

$789,544

26 years

$863,508

27 years

$943,388

28 years

$1.0 million

29 years

$1.1 million

30 years

$1.2 million

Source: Calculations by author.

No. 4: Work a little -- in retirement

Instead of going cold turkey in retirement -- from collecting a salary to suddenly earning no money and just living on savings and Social Security -- consider easing into retirement by working a little in your early years. 

Working a little in retirement is good in other ways, too. It can give your days a little more structure and offer valuable opportunities for socializing, preventing you from feeling isolated and, perhaps, depressed.

No. 5: Make the most of retirement accounts

You may have one or more IRAs and 401(k) accounts -- of the traditional and/or Roth variety -- and you may be contributing to them every year.

No. 6: Include dividends in your portfolio

Another way to boost your income in retirement is to have a meaningful chunk of your portfolio invested in dividend-paying stocks. A portfolio of non-dividend payers would require you to sell off some shares in order to generate income, leaving a smaller portfolio to keep growing for you. 

You can invest in individual stocks such as Verizon Communications and Johnson & Johnson, which recently yielded 4% and 2.6%, respectively, or you might opt for a mutual fund or exchange-traded fund (ETF) that features ample dividends. The SPDR S&P 500 ETF (SPY) recently yielded 1.75%, for example, while the iShares Select Dividend ETF (DVY) and iShares U.S. Preferred Stock ETF (PFF) recently yielded about 3.6% and 4.7%, respectively.

No. 7: Consider annuities for pension-like income

Annuities can be another great option for income in retirement.

 Focus on fixed annuities, as they generally don't have the steep fees and restrictive terms as indexed annuities and variable annuities, and learn more about them before investing.

Person/People

Cost

Monthly Income

Annual Income Equivalent

65-year-old man

$100,000

$525

$6,300

65-year-old woman

$100,000

$496

$5,952

70-year-old man

$100,000

$599

$7,188

70-year-old woman

$100,000

$566

$6,792

65-year-old couple

$200,000

$885

$10,620

70-year-old couple

$200,000

$987

$11,844

75-year-old couple

$200,000

$1,134

$13,608

A 65-year-old man, for example, could receive around $569 per month for the rest of his life starting at age 75 for about $50,000.

No. 8: Collect income from interest

Interest is another kind of retirement income to consider -- though it's far less appealing an option these days than it has been in the past and maybe in the future. 

j Remember that in the 1980s, interest rates were in the teens and even around 20% for a while. You could get more than 15% from a six-month CD back in 1981! Rates of 5% or more are certainly possible in future years.

No. 9: Consider a reverse mortgage

Reverse mortgages are an income-producing option for many but not all people.

But when you move out -- either to a nursing home or cemetery, the loan must be repaid, typically through the sale of the home. Read up on reverse mortgages to see if one might make sense for you.

No. 10: Relocation

Relocation can be a surprisingly powerful way to generate more income in retirement, under the right circumstances. For example, if you live in a high-cost-of-living area or simply have a costly home, you might sell it and move -- either to a smaller, easier-to-maintain home.