3 unexpected sources of retirement income | personal financing

(Kylie Hagen)

Retirement looks a little different for everyone — and so does the way we save for it. Retirement accounts like 401(k)s and IRAs form the backbone of most people’s retirement savings plans, and many can count on Social Security for some help, too.

But these aren’t the only ways to fund your retirement. Here are three lesser known sources of retirement income that you may want to add to your financial plan.

1. Dividends

Certain Shares pay dividends To shareholders periodically, usually once every three months. You may only get a few dollars for each share you own, but if you have a large investment portfolio, those earnings can increase over time.

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If you have a $500,000 portfolio that has a 3% total return, that means you will be earning about $15,000 annually in dividends alone. This can go a long way toward covering your retirement expenses, and may help you increase your personal savings even further.

You can invest in individual stocks that pay dividends if you wish. But it may be easier to find a file Dividend Index Fund. This gives you immediate ownership in many of the shares distributed. Spreading your money among multiple companies like this is smart because if a few of your stocks have to cut their dividends during tough times, you’ll have other companies to take the slack.

2. Health savings account

You can store savings in a file Health Savings Account (HSA) If you have a health insurance plan with high deductibles. This is a deductible of $1,400 or more for an individual or $2,800 or more for a family. Your HSA contributions reduce your taxable income for the year, just like traditional IRA contributions, and you won’t owe taxes on this money at all if you spend it on medical expenses.

But if you hope to use a file HSA For retirement savings, try to avoid early withdrawals whenever possible. Find a provider that will enable you to invest your HSA money and let it grow until you are at least 65 years old. After this age, you can make non-medical withdrawals, although you will owe taxes on this money. And if you make a non-medical withdrawal when you are under 65, you will face a penalty of 20% plus taxes.

Individuals can contribute up to $3,650 to a Hayel Saeed Anam account in 2022, while families can contribute up to $7,300. If you are 55 or older, you can add an additional $1,000 to these limits. Those who plan to make an HSA part of their retirement plan should monitor these limits over time. They may be able to save more money in the coming years.

3. Your home

There are several ways you can use your home to make money when you retire. If you travel often or have an extra room, you might consider renting it out to guests, either at in the short or long term. There are plenty of home rental websites online that can help you advertise your rent and collect payments easily.

Another option is a file reverse mortgage. This is only available to adults 62 years of age or older who have a significant amount of equity in their own home. Essentially, it enables you to borrow against the capital in your home and use the money for whatever you want. You don’t have to make any payments as long as you live in the house, but if you die or move out, you or your property must pay the loan balance, plus interest.

These loans can be complex and have fees associated with them, so they are not available to everyone. But it’s an option worth considering for seniors who find themselves short on savings in retirement.

This isn’t an exhaustive list of all the ways you can fund retirement, but we hope it got you thinking about some unconventional ideas. See if you can brainstorm any other sources of retirement income, then look at your list and decide which ones you’d like to incorporate into your retirement plan.

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