Social security is not meant to solely support retired seniors. In fact, according to CNN Money, social security will only replace 40% of the average retiree’s income.1 This leaves two options for retirees, they can either adjust their standard of living to survive off of social security alone or find additional income sources to make up the other 60%. Below are five retirement income strategies that may be smart options for you to supplement your social security income.1
1. Bond Laddering
Historically, bonds pay very low interest rates. With a bond ladder, investors purchase bonds that mature at different times. This allows you to still get your current income from the bonds that mature quickly, but also provides the potential for increased income from the longer term bonds if interest rates rise down the road.
2. Buy, Start, or Invest in a Small Business
This unusual method of generating income is recently gaining popularity with seniors.1 Some see it as a cure for boredom and are excited to start running their own business. Others take a more hands off approach and invest in someone else’s small business in exchange for a percent of the profits. This strategy is a risky one because if the business fails the investment is lost, but it is something for entrepreneurial-minded retirees to consider.
3. Real Estate
Investing in real estate can provide income from rent and has the potential to increase your net worth over time if the housing market increases. Seniors interested in investing in real estate need to carefully consider how they will handle vacancies, bad tenants, and maintenance issues before purchasing real estate.
4. Dividend Growth Investing
Investing in stocks that pay scheduled dividends puts your money to work for you. Additionally, the dividends have the possibility to increase over time if interest rates rise. If you are not comfortable with investing in individualized stocks, you can invest in a mutual fund that pays dividends instead.
5. Reverse Mortgage
Qualified senior homeowners can access a portion of their home equity as usable funds with a reverse mortgage. Borrowers can customize the payments from proceeds to their needs whether it be a lump sum,2 monthly payments, line of credit that grows over time,3 or any combination of the three. With a reverse mortgage you can continue to live in your home and maintain the title,4 while eliminating your monthly mortgage payments5 or increasing your cash flow.
If you would like to learn how much you might qualify for with a reverse mortgage fill out the calculator above or call 1.800.976.6211 to learn more.
1 CNN Money 5 income strategies to supplement Social Security in Retirement https://money.cnn.com/2018/05/21/retirement/supplement-social-security/index.html
2 The funds available to the borrower may be restricted for the first 12 months after loan closing, due to HECM reverse mortgage requirements. In addition, the borrower may need to set aside additional funds from the loan proceeds to pay for taxes and insurance.
3 The reverse mortgage loan balance grows at the same rate as the available line of credit. Line of credit growth occurs and is only a benefit when a portion of the line of credit is not used. The unused line of credit grows over time and more funds become available during the life of the loan.
4 You will retain the title and ownership during the life of the loan, and you can sell your home at any time (at which time the loan becomes due). The loan will not become due and subject to repayment as long as you continue to meet loan obligations such as living in the home as your primary residence, maintaining the home according to the Federal Housing Administration (FHA) requirements, and paying property taxes and homeowners insurance. Failing to meet these requirements can trigger a loan default that may result in foreclosure.
5 You must live in the home as your primary residence, continue to pay required property taxes, homeowners insurance, and maintain the home according to FHA requirements. Failure to meet these requirements can trigger a loan default that may result in foreclosure.