Alternatives to Social Security That Will Provide Retirement Income

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Social Security has long been the bedrock of American retirement, and many working Americans anticipate the day when they can sit back and collect a Social Security check. However, Social Security was never intended to cover 100 percent of retirement expenses, and it may do so in the future.

Consider the following: 27 Ugly Retirement Truths Social Security 2022: How the COLA Will Increase Benefits for the Average Senior Couple

According to the Social Security Trustees’ most recent report, the Social Security Trust Fund will be depleted by 2033, implying that future benefits will likely be reduced unless lawmakers take action to avert this outcome. Regardless, supplemental sources of income are typically required to enjoy a fully funded retirement.

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Your Individual Nest Egg

When it comes to supplementing Social Security income, the best option is to build your own retirement nest egg. If you’ve ever worked for a large company, you’re probably familiar with 401(k), 403(b), or 457 plans. If you worked independently, you may have made contributions to an IRA or even a solo 401(k) plan. Whatever the case, with diligent saving, you can typically accumulate a nest egg that exceeds the amount of Social Security benefits you will receive. If you’re still a long way from retirement, take advantage of this time to maximize your contributions to these tax-advantaged plans in order to avoid having to rely on Social Security.

 

Pension Schemes for Businesses

Over the last few decades, the majority of businesses have shifted away from traditional pension plans and toward 401(k) plans and similar arrangements. However, if you began your career decades ago or work for an old-line company that still offers a pension, you may be eligible for lifetime payments after retirement. If you work for a police department, a fire department, or any other public service position, such as a government position, you are more likely to be eligible for a traditional pension. Several of these pensions have the potential to be quite lucrative. For instance, if you served in the military for 20 years, you are likely eligible for a pension equal to up to 2.5 percent of your highest 36 months of basic pay.

Rental Revenue

Passive income is an excellent way to supplement your Social Security benefits, and rental income is a particularly popular option. There are numerous ways to generate rental income. Perhaps the most straightforward option is to rent out a room in your own home that you no longer require or utilize. Alternatively, you could purchase a short-term rental unit in a resort area or a long-term rental unit in an area with a housing shortage.

 

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Aside Job

While side gigs are frequently thought of as a way for workers to supplement their incomes, they can also be used as a supplement to Social Security by retirees. However, side gigs do not have to be a grind. When you retire, you can capitalize on the skills and talents you developed throughout your career and turn them into something profitable. For example, one way to earn money is to teach classes, either in person or online. Additionally, you could market your talents as an artist, interior designer, or woodworker. Many people are likely hungry to learn something you have to offer, so determine what you enjoy doing the most and determine whether there is a market for it.

Downsizing

While downsizing may not appear to be a viable method of generating retirement income, it can be. Consider owning a 3,000-square-foot home but living alone. You’ll likely save hundreds of thousands of dollars by selling your home and downsizing to an 800-square-foot condo or smaller house. When monthly withdrawals are made with care, this can provide a significant boost to your retirement income.

Annuity

By definition, an annuity is a way to supplement your retirement income. To “annuitize” an investment is to convert it from a pool of capital to a lifetime income stream. If you die before the end of the policy period, the insurance company retains the remaining payments. However, if you outlive your anticipated lifespan, the insurance company is obligated to pay you for the remainder of your years. As a result, you can never outlive your income, making an annuity an attractive option for those seeking to supplement Social Security with guaranteed lifetime payments.

Relocating

While relocation will not generate additional revenue per se, it can have a similar effect. By relocating to the right location, you can significantly reduce your overall expenses, from housing to utilities, food, entertainment, and transportation. The money you save effectively becomes an additional source of income, as you now get to keep the money you would have spent on a monthly basis otherwise. This can amount to a monthly “raise” of thousands of dollars for some retirees who relocate.

Social Security benefits for the spouse

If you are not eligible for Social Security on your own or if your benefit is insufficient, you may be able to increase it by claiming spousal Social Security. When you’re married, you’re entitled to 50% of your spouse’s payout if it exceeds your own eligibility. This benefit is available even if you are divorced, as long as you were married for at least ten years prior to the divorce.

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Royalties
If you work in the entertainment or performing arts industries, for example, you may be able to establish a royalty stream for yourself in retirement. A royalty is a recurring payment made in exchange for the use of your property or body of work. For instance, if you appear in a film, you may continue to be compensated each time the film is aired on television or via streaming services. If you publish a book, you may be eligible to receive royalties on each copy sold. While royalties are not always predictable, they can supplement Social Security benefits if you work in the arts or entertainment.

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Mortgage in Reverse

While a reverse mortgage is not for everyone, it can be an excellent source of retirement income for some retirees. A reverse mortgage is a loan that allows you to access the equity in your home, either in one lump sum or over time through monthly payments. The money you borrow is a mortgage against your home, which must be repaid in full with the home’s remaining equity after your death. While reverse mortgages do have some drawbacks, including their cost, for some seniors over the age of 62 – the minimum age to qualify – they can be an excellent supplement to Social Security.

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