Whether you have been a member of the workforce for decades or you’re a young adult who is just beginning their career, it’s a good idea to have one eye on your retirement. After all, once your working days are over, it’s important that you can maintain your standard of living while enjoying the free time associated with no longer working. While your employer may offer a retirement plan, there are other ways to fund your retirement to ensure that you are able to relax later in your life.
According to studies published by Magnify Money, many Americans are not in a good place concerning their retirement. Consider some of these statistics:
• The average American believes they need $1.9 million to comfortably retire
• Only 51% of American families have at least one retirement account
• The median retirement account had $65,000 in it in 2019
• 80% of Americans lack basic retirement planning skills
• 71% of Americans age 71 and over fear that their social security will run out
With those numbers in mind, it’s clear that most people (you may be one of them) need help understanding how to better fund their retirement accounts. Obviously, having a retirement account and/or pension plan through your employer is a great start, but there are plenty of other options that you should consider to increase your net worth for your post-working years.
Open an IRA
There are different types of IRAs and you should certainly talk to a financial advisor about which type is the best choice for you. However, having an IRA (individual retirement account) is a great way to supplement your retirement funds. IRAs are wildly popular among people who are looking to fund their retirement accounts thanks to the tax breaks that they provide. In many cases, you can contribute up to $5,000 per year into your IRA without having to claim that $5,000 as earned income on your taxes. While you can certainly put more money than that into your account, if you open an IRA when you’re 30 and put $5,000 in it until you’re 65, you will have $175,000 in it.
Invest in Real Estate
There is a reason that most of the world’s millionaires have real estate somewhere in their portfolios. As long as humanity is walking around on planet earth, they will need somewhere to live and somewhere to operate their businesses. Contrary to popular belief, you don’t have to be wealthy to invest in real estate. For instance, if plan on downsizing into a smaller home once your children have moved out of the house, you can keep your primary residence as a rental property. While you obviously won’t get a single lump sum by selling the property, this steady stream of rental income can prove beneficial in your later years. Additionally, you can find real estate crowdfunding opportunities and real estate syndicates that allow you to passively invest in real estate. In the same way that you would invest in the stock market, these investment opportunities allow you to invest in a property without dealing with the day-to-day headaches associated with advertising, maintenance and difficult tenants.
Making the Most of Your Property
Even if you don’t plan on moving, you may be able to generate additional income through spaces that are already on your property. Thanks to websites such as Air BnB, many Americans are now generating rental income from sheds, campers and pool houses that are already on their property. If you live in an area that lends itself to tourism, consider cleaning up one of these spaces, putting some furniture in it and renting it out to travelers who are looking for more of an experience than they can get in a hotel. Other services such as GaragePointer and Roost help people with spacious garages or barns connect with boat owners, car collectors or people who need somewhere to board their animals (primarily horses and other large animals). While you may not get rich off of these services, they can generate some relatively easy income.
Taking Out a Reverse Mortgage
You may have seen commercials for reverse mortgage companies, but still feel unsure about how they work and what they are. Under a reverse mortgage agreement, homeowners 62 years old and older can receive regular payments based on the equity they have in their home. Once the borrower passes away or moves out of the property, the loan becomes due. That means that you should have a conversation with your children or other heirs and let them know what you’re doing with the home in order to prevent any surprises in the future.
Selling What You Don’t Need
Depending on your age, you may have amassed a lot of expensive items over the years. For instance, maybe you purchased a motorcycle in your 40s that your age and current physical state doesn’t allow you to ride anymore. Maybe you bought an RV because you planned on spending your retirement years traveling the country, but now you’ve lost interest in that sort of lifestyle. Take an honest inventory of the items that you have and don’t use and consider selling them. If there’s an item that you no longer use, don’t be afraid to take a loss on it. After all, holding onto something that you don’t use anymore is no more fiscally wise than selling it for less than you paid for it originally.
Consider Cryptocurrency
Cryptocurrency is certainly “hot trend” right now, but there’s a reason for that. Value for this digital currency is soaring, and in many cases, you’re able to get it for very little money. Cryptocurrency is considered so valuable that there are even pro athletes who are getting their entire contract paid in cryptocurrency. If you don’t consider yourself to be tech-savvy, don’t be afraid to reach out to a financial advisor who has a background in crypto to get more information.
Monetize a Hobby
If you’re good at word working, art or crafting, consider turning your hobby into your side hustle. It’s easy to take your talent for granted and assume that people wouldn’t pay for what you do, but that’s often not the case. For instance, websites such as Fiverr provide plenty of options for people to provide a service to those looking for it. If you’re a musician, you can offer to record guitar tracks for people in exchange for money. If you’re great at wood working or other art forms, consider opening an Etsy shop or selling your products on your social media outlets. Again, you may not strike it rich, but a few hundred extra dollars a month can add up quickly, especially if you’re committed to being fiscally responsible with the money you generate.
The Stock Market
While the stock market is fickle at best, there is something to be said for working with a licensed broker who can help you build a diverse portfolio. Obviously, the amount that you’re able to invest depends on your current financial status but turning some money into more money is at the heart of retirement planning. If you’re already somewhat familiar with the stock market, consider taking a look at one of the many apps that are now available that allow you to make and manage investments from your phone or tablet. There is a lot of useful information on these apps that can help you decide what stocks are trending up so you can make your moves accordingly.
Responsible retirement planning doesn’t mean that you have to amass millions of dollars in a bank account. If you’re able to pay off your mortgage before you retire and minimize the amount of debt that you’re responsible for, you can be in a position to avoid financial stress after your career ends. However, anything you can do to generate additional income can simply make things easier. It’s also worth noting that you don’t have to employ all of these retirement savings strategies. Instead, research the ones that jump out to you and consider speaking with a trusted financial advisor. Making an informed decision can be the difference in struggling through your golden years and retiring into a life of luxury.
