One of the biggest challenges of being in retirement is the income. Many Americans rely on social security, and this end up not being enough. Even if it is enough to live, it tends not to be enough to be as comfortable as you were pre-retirement. It takes a lot of preparation to set up a truly cushy situation after you stop working, but we at Saving Advice are here to help. Not enough people worry about their income post-employment, they just care about the savings. Savings are great, but these tips on growing your retirement income will help you figure out the magic question: how much will you need?
Saving is one of the focal points for retirement planning. The amount you save, as well as what you do with it, will have a huge effect on your quality of life as a retiree. One of the best ways to plan this value out is to use the “interest-as-income” model. This method relies on only interest for income, and it avoids touching any of your savings. The calculation is easy: Take seven percent (the average yield of a solid index fund) of your savings, and that is your retirement income. So, if you make $70k at work, you’ll need $1 million in retirement savings to replace that with you interest. this allows you to pull out any excess interest the moment it hits, and never have less than that million in your savings. We use indexes because they are pretty reliable. The S&P Index, for example, takes the 500 best performing stocks and indexes them to help track growth.
What if I Don’t Have Enough?
No need to fear! There are many different ways to make up for a gap in income. Say you can only make $40k a year with your retirement and social security accounted for. There are to routes to take here:
- Downsize: The first, and less attractive, option is to downsize your life. Move into a smaller place, get a car with no payment, etc. These are things that matter a lot less when you are retired, and you can find a ton of room in the budget. The average new car payment in America is $550 (used being $393); You can save thousands by foregoing the fancy car. You can also cut costs by eating out less, spending more date nights in the house, etc.
- Side Hustle: There are many fun skills and hobbies you have probably mastered over the years. don’t be afraid to use the things you enjoy to make a little money. Do you know how to knit or woodwork? Sell some little trade goods on a site like Etsy. Do you enjoy keeping a tidy home? Work as a cleaner on the weekends for $25/hr. All of these can keep you from getting another full-time gig, and make up for lost cash along the way!
Retirement takes a ton of planning, and retirement income isn’t easy to come by. Make sure you start prepping early, and go hard as long as you can in order to set yourself up for the best life possible. Invest wisely, hustle a little on the side, and live frugally when you can to make sure that you can truly stop working when you are done.