4 ways to create more pocket money in retirement – The Motley Fool

Retirement is a joyous and exciting time, but it can also be stressful if you are not financially prepared. According to a Northwestern Mutual study, money would be the primary source of stress for American adults. About a quarter of US households are considered financially healthy, according to a report from the Financial Health Network.

If you want to have enough money for retirement, you can do it in different ways to strengthen your capital and ensure that your money stretches as much as possible in your years of the year.

1. Delaying the claim for social security benefits

About 9 out of 10 recently retired adults report claiming Social Security at age 62, according to a Nationwide Retirement Institute report. You can claim benefits as early as age 62, but you will receive more per month if you wait to file.

For every month that you delay claiming benefits after the age of 62, you will receive slightly larger checks each month. While waiting for your retirement age (FRA), 66, 67 or somewhere in between, you will receive the full amount to which you are entitled. If you continue to wait beyond your FRA (up to 70 years), you will receive a bonus in addition to all your benefits.

The biggest advantage of delaying benefits is that you will receive these big checks for life. So, even if you live up to 110 years, you will still receive more each month until you have asked for benefits earlier.

These additional benefits can also make a significant difference. For example, suppose your FRA is 67 years old and claiming at that age you would receive $ 1,500 a month. If you were to claim at age 62, you would receive 30% less each month – or $ 1,050. Wait until the age of 70 to claim, however, and you would receive a 24% boost, or $ 1,860 a month. If you're struggling to make ends meet, those few hundred dollars more a month could go a long way.

2. Pay off your debt before retirement

In order to maximize your discretionary retirement expenses, you must minimize your necessary living expenses, including the repayment of your debts. If you can eliminate your mortgage, auto loans, student loans and credit card debt, you will have a lot more money to spend on retirement.

If you can not repay all your debts before retirement, at least try to tackle high-rate debt. This type of debt, such as credit card debt, is extremely toxic and expensive and could cost you thousands of dollars in interest over time. And if you spend thousands in interest when you live on a fixed income in retirement, you will not have as much to spend on the things you love.

To determine which of your debts to eliminate first, assign them a priority based on their interest rates. Start by paying off the debt with the highest interest rate – even if it's not your highest balance – and then reduce your list until you are no longer in debt. If possible, it may be wise not to take a pension until you have paid your debt in full, especially if your savings are thin and a good part of your retirement income each month will be used to pay your pension. debt refund. But if you continue to pay off your debts in retirement, make sure your debts are low interest rate, such as a mortgage.

3. Choose a part-time job

Nowadays, it is easier than ever to start a secondary activity at any age to earn extra money each month. And the best part is that for many of these jobs, you can work as much or as little as you want, so you can still enjoy a flexible retirement schedule.

To walk the dogs to become a Uber or Lyft To conduct consulting activities, there are many part-time opportunities to earn extra money. You can even choose to start a business in retirement and something as simple as selling your crafts on Etsy can help you generate additional income. Sometimes, even a few hundred dollars more a month can make the difference between prospering and getting by.

Keep in mind, however, that if you claim social security benefits before your FRA, working may reduce the amount of your benefits, at least temporarily. In the years preceding your FRA, your benefits will be reduced by $ 1 for every $ 2 you earn beyond the 2019 income cap, which was $ 17,640. Then, in the year you reach your FRA, you will get $ 1 deducted from your benefits for every $ 3 earned above $ 46,920.

Once you have finally reached your FRA, the amount of your benefit will be recalculated to reflect the discounts you received while you were working. So, even if technically you do not lose money, it is an important factor to consider if you plan to apply early for Social Security and continue working.

4. Consider finding more affordable housing

Shelter costs are one of the most important costs you will incur every month when you retire. Even if you have fully repaid your mortgage, you still have to pay property taxes, insurance and utilities. And if the children have moved out and you end up with more house than you need, you could spend more than you need on housing, leaving you with less money for fun retirement activities.

If you're ready to move, finding a more affordable home – whether in town or in the country – can be a wise financial decision. Sometimes you may even be able to settle in an ideal retirement home while reducing your monthly expenses. If the money is tight at retirement, in some cities in the United States, you can survive with the only social security benefits while comfortably spending your years of the year.

Before you pack your bags and move, however, be sure to weigh the pros and cons of finding a new home. For example, are you going away from your family and friends? If so, will this outweigh the financial benefits? In addition, how will taxes affect your monthly payments? For example, some regions may charge higher property taxes, but many states do not have taxes on their income. So you could always save money by choosing one of these states. Think about all the advantages and disadvantages and set a new budget for your potential new city to get a sense of the real costs, which will allow you to make the best decision.

If your savings are not the ones you want and if you are approaching the retirement age, all hope is not lost. There are ways to increase your disposable income and save money so that your money lasts as long as possible. In doing so, you will give yourself the best chance to enjoy the retirement of your dreams.