Far too many seniors are struggling financially after they’ve left the working world. By following these five tips for increasing your cash flow during retirement, you don’t have to be one of them.
1. Wait to claim your Social Security benefits until after full retirement age
Your Social Security check will be bigger if you wait until full retirement age to start collecting. Benefits go up until age 70. You not only increase your own income by waiting, but you also enrich the survivor’s benefits your spouse will receive if you were the higher earner and your spouse outlives you.
But be aware that waiting until age 70 to collect your Social Security comes at a significant cost: you miss out on years of benefits that you could have been collecting. If you live long enough, you’ll be better off. But maybe you have a family history of health issues that you need to take into consideration.
If you’re one of those seniors who regularly reads the obituaries, you know that not everyone lives until age 85. Calculate how long you’ll need to live to break even by adding up how much income you miss out on by waiting and dividing that by your higher monthly benefit.
2. Work part-time after retirement
The most straightforward way to increase your retirement income is by taking a part-time job. But you have to be careful. If you start taking your Social Security benefits before full retirement age, earning too much from a part-time job will reduce your monthly benefit.
You’ll get a credit later if they’ve reduced your Social Security benefit while you’re working, but the reduction means you may not increase your income much by taking a part-time job.
After full retirement age, you can earn as much as you want without a cut in Social Security benefits. So grab your spouse and work on a cruise ship, or be a consultant to your former employer. It’s time to explore what you’re passionate about!
3. Move to a state that doesn’t tax retirement income
There are 37 states that don’t tax Social Security benefits, and some states don’t even tax pension income, 401(k) withdrawals, or IRA withdrawals. You’ve lived in the old neighborhood for fifty years; it may be time for a move!
Every dollar you don’t pay in taxes is a dollar you get to use on road trips in the summer, or investing in your grandkids’ education. Go for it!
4. Open a Roth account for retirement savings
Even if you move to a state that doesn’t tax your Social Security benefits and withdrawals from retirement accounts, you still have to pay federal taxes on those items. The federal government does not tax withdrawals from Roth 401(k)s or Roth IRAs.
Many investors take their tax breaks up front by investing in traditional 401(k)s and IRAs, then pay taxes on withdrawals from those accounts during retirement. It’s more difficult to max out your accounts while investing with taxed income, but you’ll be much happier during retirement when you can withdraw that money without worrying about federal taxes!
5. Save more money
Ah, this is so much easier said than done! Most Americans are substantially far behind in saving for retirement. But, where there’s a will, there’s a way! Cook at home more often. Consider taking a second, part-time job. Prioritize saving in your monthly budget. Get a raise every year? Divert your salary increases and bonus checks right to retirement savings instead of getting used to having a bigger paycheck or a lump sum around the holidays.
The more you save, and the younger you are when you start, the more money you’ll have to enjoy during your hard-earned “Golden Years.” Making a move to a state that doesn’t tax Social Security benefits or withdrawals from your retirement accounts can put thousands of dollars in your pocket.
Finding a part-time job you feel passionate about can open up a whole new world in your retirement years. You can increase your retirement dollars by taking these steps, and there are options and strategies available for people of all ages. The point is, don’t put it off – the time to make provisions for your retirement years is now!