As you’re likely to realize soon if you haven’t already, a dollar doesn’t go as far as it used to. That could make retirement a tricky time for some underfunded investors, and Social Security checks probably aren’t (or won’t be) big enough to be a game-changer either. It’s not inconceivable you’ll need to rethink your retirement plans sooner or later if you want to pay all your bills as well as have a little fun later in life.
To this end, here’s a rundown of five ways to generate cash you can live on in your golden years, from the most obvious to the least obvious. The last two are particularly unusual, yet still worth considering.
Painfully obvious: Dividends
You may have spent the better part of your life investing for growth, not looking for income — cash — while you did. Your paycheck likely covered your recurring expenses and perhaps even served as the seed money for your retirement stash.
Living on profits stemming from capital appreciation of growth stocks, however, is a famously bad idea. You may need to free up some cash by selling stock at the worst possible time, getting out of a stock at a loss before it’s had a chance to recover. For perspective, a bunch of growth portfolios are now worth 20% less than they were just a few months back.
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The solution to the conundrum is obvious: less growth, more dividends. Even when their prices are upended, a good dividend stock’s payout is actually quite reliable.
For perspective, the average S&P 500 stock that pays a meaningful dividend is currently paying out about 2% of its value.
Not surprising: Working
It’s not what most current and future retirees were planning. The fact is, however, many of us may be going back to work later in life if we haven’t yet. Think tank Rand Corporation reckons around 40% of employees in the United States that are 65 years of age or older actually retired at one point but reentered the workforce. That’s roughly 10 million workers, or nearly one-fifth of that demographic.
There’s one important rule to know if you’re at this age but already collecting Social Security checks. That is, if you earn enough at a job, Social Security will reduce your monthly benefit. For 2022, every $2 above annual earnings of $19,560 lowers your monthly check by $1. It may still be well worth it though, especially since you can earn back some of those Social Security benefits reduced by working.
Makes enough sense: Rental property
Obviously, being a landlord requires you to own real estate you yourself don’t need to live in. If you …….