Right now, the so-called “three-legged stool” of retirement income is rapidly losing its legs. Social Security was never a program designed to provide an adequate retirement income — it has always been considered supplemental. By the time I retire, Social Security may not even be a contender. Few companies offer pensions anymore, and if you are close to retirement right now, your tax-advantaged retirement account may be losing value. Which means you need something else to help keep you going. Here are 3 ideas for additional retirement income:
- Reverse mortgage. If you have equity in your home, especially if you have your home paid off, you can get a reverse mortgage. The bank gives you a chunk of money (or makes payments to you). The loan is usually paid back when the house is sold. No credit or income requirements are imposed for a reverse mortgage. However, you should be careful. Reverse mortgages come with high fees and high interest. They are not for everyone.
- Part-time employment. Few people like the idea of part-time employment after they “retire”. However, it is not always a bad option. You can find a job that you can do for 20 hours a week. It keeps you busy and it can help supplement your income. It means that you have something coming in. You can even turn your hobby into a part-time job in some cases. It is something you can do while you hold off taking your RMDs and wait for the stock market (and your retirement account) to recover.
- Lifetime income annuity. This is another option. But watch out! Scams abound, and different annuities come with different hazards. In this scenario, you buy an annuity with a rather large chunk of cash. You are paid an annual income for the rest of your life — no matter how long you live. With the stock market in disarray, many people are taking a second look at lifetime income annuities because they remain steady, while retirement account portfolios lose their value in down times.
There are other options as well. You can rent out real estate or sell your home and downsize to something else. You can purchase long-term care insurance and move into a retirement or assisted living community. If you are younger, though, the best option is to start saving immediately, building a diverse portfolio that is likely to withstand the test of time.
Can you think of other ideas for additional retirement income?
image source: Frizzychick via Flickr