5 Proven Ways to Increase Your Retirement Income – Motley's Fool

Lack of money in retirement is a major concern, so much so that 60% of older Americans are more worried about spending for their money than dying. If you are worried about not having enough money in retirement, take steps to increase your income as much as you can. Here are some effective ways to do it.

1. Take advantage of catch-up contributions in your IRA or 401 (k)

One of the benefits of being 50 years old or older is to have more leeway from the IRS to finance your retirement plan. Currently, workers aged 50 and over benefit from a $ 1,000 catch-up under the IRA and a catch-up of $ 6,000,401 (k), which can lead to a substantial increase in total savings. (Do not forget that these catch-ups add up to the standard savings limits for these accounts, which currently amount to $ 5,500 for the first and $ 18,500 for the last one. )

Now imagine that you are 52 years old and want to retire at age 67. If you increase your IRA contributions by $ 1,000 a year over the next 15 years, you would add $ 25,000 to your nest egg if your investments generate an average annual return of 7% during that time. In the meantime, if you increase your 401 (k) contributions by $ 6,000 a year over the same period, you would get an additional $ 151,000, assuming that same return is 7%.

2. Deposit Social Security as late as possible

Although your social security benefits are themselves based on your best 35 years of earnings, the age at which you report these benefits may increase, decrease or remain the same. If you are working at retirement age (which is 66, 67 or 66 years and a certain number of months, depending on your year of birth), you benefit from the exact monthly benefit at which your earnings statement gives you right. But if you delay the benefits past At the age of retirement, you will automatically increase them by 8% per year until you are 70 years old.

Suppose you are entitled to a full monthly benefit of $ 1,600 to age 67. If you wait until you are 70, you will increase each installment to $ 1,984. In all, you will receive $ 4,600 more per year from Social Security.

3. Expense of dividend-paying stocks

Not all stocks offer dividends, and those that do not do not pay you money while you hold them. On the other hand, when you fill your portfolio with dividend stocks, you will have quarterly payments to expect, which can increase your retirement income. Another benefit of holding dividend stocks is that while the stock market is generally underperforming, you will generally continue to receive dividends on your account, allowing you to earn income at a time when you may be forced to pay. to sell a loss to track your bills.

4. Buy bonds

Like dividend stocks, bonds offer the benefit of consistent (though semi-annual) payments that can be a vital source of income later in life. And since bonds themselves are considered less risky than stocks, they are an appropriate investment for older people. Better yet, consider loading on municipal bonds. In this way, you will automatically avoid federal taxes on your interest payments and, if you buy municipal bonds issued by your home country, you will also be exempt from national and local taxes.

5. Change your housing situation

Just as housing is the most important monthly expense of most people during their pre-retirement years, it could also remain your biggest expense going on once your career is over. As such, reducing these expenses could save you a lot of money when you are older.

You can consider several options. First, you can choose to reduce the size of your home in a smaller, less expensive home to heat, cool and maintain. You can also settle in a less expensive area of ​​the country, for example in a place where property taxes are not as high. Moving from landlord to tenant can also save you money, especially if your home is old and requires many repairs. It is therefore worth considering the different ways to reduce your housing costs.

Exhausting at retirement is a risk that you can not afford. Follow these tips, and you will have less to worry about once your golden years unfold.