The hope is that by retirement, you’ll have enough wealth accumulated and enough streams of revenue established that you won’t have to worry about money for the rest of your life. However, many retirees eventually find themselves in the position of needing more income.
What are you supposed to do if you need more retirement income when you’re already well into retirement?
Analyzing the Problem
Before you take any actionable steps to correct the problem, you need a thorough understanding of the nature and root causes of the problem. Otherwise, you may not be able to apply the correct solution, and you may end up in a similar position again.
It may feel like the main issue in your life is lack of income, but there may be other factors at play.
Lack of Income
If your problem truly is a lack of income, it may arise from a variety of root causes. For example, you may not have enough wealth accumulated to generate the interest and dividends you need to serve as income. You may not be taking full advantage of all the income sources and support available to you. Or this may be little more than a problem with resource allocation, which is correctable through rebalancing your portfolio.
Lack of Liquidity
Your problem may also be associated with a lack of liquidity. If you have ample assets, and it feels like you don’t have enough money to live on, you might be able to solve the issue by redistributing your assets in a way that favors liquidity.
As a simple example, let’s say you have a house that’s paid off and worth $500,000. If you can convert that equity into something more liquid, you can hypothetically invest the proceeds and capitalize on 4 percent interest each year, amounting to an extra $20,000 of annual income.
Excessive Expenses
Some retirees have ample income, but because they have excessive expenses, it feels insufficient. It’s perfectly acceptable to desire a more lavish lifestyle or have different priorities than others, but you also need to be mindful of your means and attempt to live below them.
Regardless of whether your issues belong to one or more of these categories, it’s a good idea to dig a bit deeper and figure out why this problem is occurring. Typically, this is a result of one or more intersecting factors, like:
Shortsighted Forecasting
Some retirees have severely underestimated the amount of income they would need in retirement. Most commonly, this is a problem associated with medical and healthcare expenses, but this isn’t an exclusive category of expenses to consider. That’s one reason why it’s a good idea to estimate conservatively when planning for your retirement. If you haven’t done so thus far, now is the time to adjust your approach to estimation and forecasting.
New Expenses
You might also have to contend with new expenses that you didn’t anticipate in your journey to retirement. For example, if you’re currently housing your adult children, if you forgot to account for something significant like property taxes, or if you’re faced with ongoing expenses from a medical condition, you might be blindsided in terms of how much money you need to survive.
Inflation and Changing Dynamics
Factors like inflation and changing economic dynamics can also throw a wrench in your income forecasting plans. Most retirement calculations incorporate inflation as an assumption, but this is a guess at best. Over the course of many years, even relatively small factors can add up to undermine or completely compromise your financial planning.
Asset Underperformance
Some retirees struggle because of asset underperformance. They may have expected to reach a certain level of wealth by this point in their lives, but they may not have it because their portfolios haven’t performed as well as they expected. This could be due to poor planning, unexpected economic developments, or some combination of both. In any case, it leaves you without the assets you need to cultivate ample income.
Lifestyle Changes
Retirement planning advisors typically suggest planning for a lifestyle slightly below what you’re used to while working. This is solid and reasonable for most people, but some people want a more luxurious or more comfortable retirement. If you’ve made significant improvements to your lifestyle, or if you just want to retain the lifestyle you once had, you’ll need more income than the bare minimum.
Excessive Lifespan
You may also be stressing about lack of retirement income because you now realize the possibility of outliving your expected lifespan. This is generally a good problem to have, but it requires you to reallocate your resources and boost your income if you want to sustain yourself indefinitely.
Adding New Sources of Income
There are several ways you can generate more income in retirement. That is, if that seems like the best solution for your specific issue. The most straightforward option, though it’s a bit of an unpleasant one, is to start working again. Depending on your physical capabilities, mental capabilities, and previous relationships, you may be able to return to your previous career in a part-time capacity. You may also take on a new role somewhere else – which might be good for your mental and physical health.
That said, many retirees are reluctant to go back to work, in part because they’ve gotten so accustomed to living an autonomous, flexible lifestyle. If you want to retain these advantages, consider starting your own business or a side gig, which functions like a business.
This is a powerful move because it gives you an opportunity to make practically unlimited income. This is especially true if you have a good idea grounding your business venture. There are also practically unlimited ways that you can make money. All that matters is that you have a product or service that people actually want.
Getting Started
Getting started is arguably the hardest part. You’ll need to find something within your physical and mental capabilities, something that genuinely interests you, and something that people are willing to pay money for. From there, you can go through the steps of writing a business plan, building your brand, and developing a marketing and advertising strategy.
These days, it’s easier than ever to launch a business, in part because you can create and support a centralized website. With the best VPS service, you can also host that website in a way that’s inexpensive, reliable, and secure.
As you grow your business and recruit new clients, you can generate more money and keep yourself active at the same time. And because this is your business, you can take on only the work you genuinely want to do, cutting clients and turning work away if it’s not a good fit for you or if you need a break.
If you’re not feeling particularly inspired as an entrepreneur, keep in mind that there are plenty of accessible side gigs that can keep you busy, such as driving for a ridesharing company or delivering groceries for people.
Rebalancing Your Portfolio
Another potential solution is rebalancing your portfolio, which is especially important if you lack liquidity or if you don’t have enough income sources from your nest egg. These are some assets that might support a better income-generating portfolio:
Dividend Stocks
Dividend stocks are generally reliable. But, you will have to do your due diligence for each individual company you want to add to your portfolio. Companies that have reliably paid quarterly dividends for decades are generally dependable. They will likely continue paying dividends well into the future, while simultaneously appreciating in value. Better yet, invest in an ETF that includes exposure to many different types of dividend stocks.
Rental Properties
You can also invest in rental properties as solid income generators. Assuming you’re able to find solid rental properties for a fair price, you can rent these properties to tenants and collect more in rental income than you pay in ongoing expenses. Similarly to dividend stocks, these assets will also likely appreciate in value with time. Rental properties aren’t especially liquid. But, you can mitigate this by investing in real estate investment trusts (REITs), which are much easier to exchange.
Peer Lending
Peer lending is considered an alternative investment, but it can be a viable way to generate income with minimal risk. Depending on the parameters you choose, peer lending may be capable of providing a superior return to bonds without much of an increase in risk.
Riskier, Higher-yield Assets
Of course, you can also rebalance your portfolio in favor of slightly riskier, higher-yield assets. A general principle in investing is that safer assets are typically associated with smaller returns. While it’s good to decrease your risk and play things relatively safe in retirement, if you’re struggling with making enough income, that might be your cue to switch things up.
As always, remember to keep your portfolio diversified to minimize risk and stabilize your returns. Each investor is going to have unique goals, unique values, and a unique perspective to bring to the table.
Minimizing Expenses
If you discover that your issue is more related to excessive expenses than it is to limited income, your best course of action is to analyze your current expenses and make some cuts.
Housing
Housing is likely your biggest expense, unless your house is already paid off. Simply moving to a smaller property or moving to a less expensive area of town might be all you need to sharply decrease your expenses here. If your home is already paid off, you may consider selling it for a smaller, less expensive property, or tapping into the equity to give you more liquidity.
Healthcare/Medical
If you’ve been surprised by the health care and medical expenses you face in retirement, you’re not alone. Medicare is a solid plan, but it still costs money and it’s not perfect. Unfortunately, there isn’t much you can do to save money here. However, you can invest in GAP Insurance coverage, attend all your preventative care appointments, and take good care of your health generally to minimize your needs.
Utilities and Groceries
These essential categories are hard to cut and are somewhat minimal in nature. However, you can minimize utility costs by paying attention to your consumption and upgrading your energy efficiency. And you can minimize your grocery expenses by comparison shopping and buying in bulk.
Transportation
Retirees typically spend less on transportation than their working age counterparts. That’s partially because they no longer commute to work. But if you want to slash your transportation costs even further, consider increasingly relying on public transportation. Or, you could consider moving to an area where you can walk to most of the places that are important to you. The incidental exercise will also be valuable in preserving your health well into the future.
Insurance
We’ve already addressed health insurance to an extent, but you also need to consider your other insurance costs. Some of your insurance costs will rise as you get older, and some of your policies may become less necessary. Work directly with your insurance agent to negotiate and find the best fit policies for your needs.
Travel and Entertainment
Travel and entertainment are luxury expenses that aren’t true necessities, but they may be very important to you in retirement. For these reasons, this category of expenses is perhaps the most straightforward to cut, but also one that you may lament cutting. Consider striking a balance by pursuing hobbies and activities that are free or inexpensive. Then, plan to only reward yourself with bigger luxury expenditures once your other financial goals have been met.
Setting Yourself Up for the Future
Hopefully, the strategies and resources in this article have helped you properly analyze your financial situation so you can act resolutely and correct the issue. With steady streams of ample income and minimized expenses, you should have no trouble living comfortably.
Just make sure you optimize your portfolio and your long-term plans to accommodate many years, if not decades of retirement; set yourself up for a bright future by estimating conservatively, living below your means, and making adjustments as necessary.
