When it comes to retirement planning, IRAs and 401(k)s tend to dominate the conversation. However, they aren’t the only way people are funding their golden years. Increasingly, retirees are using income from a variety of sources to cover their monthly expenses.
[See: 10 Alternatives to Full-Time Retirement.]
Kimberly Foss, the founder and president of Empyrion Wealth Management in Roseville, California, says that’s a smart strategy. “The best advice I give my pre-retirees is to diversify your income,” she says. Here’s a look at some of the ways people are doing just that.
Purchasing rental properties. Real estate is often seen as a stable and predictable asset, so it’s no surprise people use it to supplement their retirement income. Foss says she has one client who is using real estate to replace the bond portion of his portfolio. Buying rental property for retirement income doesn’t come without risk, though. “The economy goes down or the building goes vacant — these things happen,” Foss says.
Renting out part or all of a home. Those who don’t have the capital to buy a rental property may still be able to profit off real estate. “If you can put a little kitchenette in your basement and rent it out to your nephew for $400, it’s going to have a huge impact [on your budget],” says Carla Dearing, CEO of the financial planning service SUM180. However, not everyone wants to take on a permanent housemate, and websites such as Airbnb and HomeAway make it simple to rent out part or all of a home on a temporary basis.
Making money off the exterior of a home. The money-making potential of a house isn’t limited to simply renting out space. “There are some instances when you can use the side of your house as a billboard,” says Canon Hickman, a wealth manager at Equity Concepts in Richmond, Virginia. Dearing says she has a client who boards horses in her pasture, and pole barns could be used for seasonal storage of boats, motorcycles and similar items. Services such as GaragePointer and Roost have popped up to make it easy for homeowners to connect with those seeking storage space. However, before painting an ad on the side of your house or parking a stranger’s car in your garage, check with your municipality and insurance company for approval.
Taking out a reverse mortgage. Reverse mortgages offer homeowners age 62 or older the opportunity to receive regular payments based on the equity in their home. Once the borrower passes away or moves out, the loan balance becomes due. Since the house must often be sold to pay off the loan, having an upfront conversation with family members can help avoid any unpleasant surprises later.
[See: 10 Ways to Reduce Your Housing Costs in Retirement.]
Downsizing your house. Downsizing to a less expensive home can add money to your nest egg. “Every dollar not out the door is an income strategy,” Dearing says. By downsizing to a smaller home or to a less expensive location, retirees may find they save money on property taxes, utilities, housing payments and maintenance costs.
Selling off assets. A home isn’t the only valuable thing retirees own. Motorcycles, second vehicles, RVs and other no-longer-needed items can become a significant source of income. What’s more, in the right situation, self-financing can be a way to create another stream of regular income. For example, Dearing has a client who is selling a Harley Davidson motorcycle to a relative for $200 a month.
Reselling items on eBay or Amazon. Selling off collectibles or movies is one way to make money on eBay and Amazon. Buying deeply discounted goods locally and selling them online is another. It takes some legwork to find the items that sell best, but services like Fulfillment by Amazon can make the sales and shipping process relatively easy. Small-scale sales aren’t likely to make you rich, but could bring in some extra spending money.
Monetizing a hobby. Whether it’s cooking, gardening, woodworking or something else, many retirees have a skill that can be turned into a money-maker. “You often take your talent for granted without realizing how challenging it is for someone else,” Hickman says. Simply by spreading the word to family and friends, retirees may find others who are willing to pay for their services. “One of my clients makes these really cool handmade cards,” Foss says. Selling them brings in extra income, but it doesn’t come without drawbacks. “The problem is it takes a lot of time.” As a result, creating goods and filling orders may cut into hours otherwise spent with the grandkids or in other pursuits.
Starting an encore career. As people live longer, starting another career near or at retirement age is no longer an oddity. “Two-thirds of my clients have talked about an encore career,” Foss says. Those heading back into the workforce may try a new field or pursue a variation of their old career. Consulting or freelancing are both ways to work in retirement without being tied down to a specific schedule.
Participating in the gig economy. Working in retirement doesn’t have to mean starting a new career. Thanks to the gig economy, it’s easy to make money on the side without any long-term commitments. “It doesn’t have to be slogging through another job,” Dearing says. And it’s easier than opening a business too. “You don’t have to own something or manage something. You just participate.” The transportation company Uber, which pays drivers for providing rides, is one of the most popular examples of the gig economy. However, other firms such as DogVacay, TaskRabbit and Instacart let workers get paid for everything from dog walking to lawn care to grocery shopping.
[See: 10 Ways to Make Extra Money in Retirement.]
Financial advisors say no one should rely on these nontraditional methods to fully fund their retirement. Instead, the 10 options above should be used as a supplement to IRA and 401(k) savings. “This is about — if you fall a little short — how can you make a little extra,” Hickman says.
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10 Nontraditional Ways to Fund Your Retirement originally appeared on usnews.com
