It's no secret that Americans are largely not financially prepared for retirement. Survey after survey shows how little is saved and that many are pushing back retirement, some as far back as 85. It's not your father's retirement, and it may in fact be no retirement at all.
But that said, there are ways to beat the statistics. Even if you haven't saved that fortune you hoped, with a bit of creativity you can come up with a way to supplement your retirement stash. You'll most certainly will need to. “A retiree that retires today will need more to live on in 10 to 20 years because of inflation,” says Jeff Sica, president and chief investment officer of Sica Wealth Management.
Here are a few ideas to get you started.
Tweak your portfolio
For those that have highly appreciated securities that may not be paying a dividend, consider using a Charitable Remainder Trust (CRT). It can help reduce the capital gains tax, as well as convert the asset into a steady stream of income, says Jonathan Gassman, director of tax and wealth management at Gassman & Golodny, a tax and accounting firm..
Then too, those over 59 ½ and looking to generate income could consider a partial conversion of their Traditional IRA assets to a Roth IRA – and then purchase an annuity with a lifetime income rider after the conversion. “Doing this allows you to essentially pre-pay tax on the amounts converted at today's tax rates, providing peace of mind because the income will be tax free when it is withdrawn. Consult with a tax advisor to make sure it's a smart move for your situation,” says Judy Ravenna, senior vice president with SunTrust Investment Services.
Turn your hobby into a business. For example, if you own a boat, think about getting your captain's license for chartering. “My uncle used to build lobster pots and sell them for actual usage or it made a great table for the living room,” says Gassman.
Put yourself out there as a dog walker, you'll get paid and get much needed exercise too. Make yourself available for driving to and picking up people from the airport, adds Gassman. If you love gardening anyway, why not start growing goods for others and see if you can sell them at a nearby farmer's market.
You have a ton of stuff that has accumulated over the years. Some of it is junk, but many will be treasure to someone else. Have a series of garage sales. Sort through your belongings and get rid of what you don't need. “Not only will you get cash, but you'll free up storage too,” points out Frank Festi, Jr., a certified financial planner and principal with Rea & Associates, an accounting firm.
Rethink your house
What do you need that big house for? The money you'll save by moving to smaller digs will free up monthly cash that was going toward hefty heating and air conditioning bills, not to mention maintenance. This move can also be a plus tax-wise. “You can sell your home for more than you paid for it and not have to pay capital gains tax,” explains Festi. The amount excluded is $250,000, for an individual, or $500,000 for a married couple.
“If you're hurting for cash you may want to consider a reverse mortgage. If you're not worried about leaving an inheritance, this is a solid option,” he adds.
Review your life insurance
The policy you have today may no longer be applicable. Check with your advisor to be sure. You may be able to cash in on a death benefit if it's no longer needed. However, you'll have to pay tax on it. Another option would be to do a tax-free exchange into an annuity policy and have cash flow for the rest of your life, says Festi.
Not only will you be occupying your time and doing some good in the world, when you're volunteering, you're not spending. “Find ways to help further causes you believe in. This is a great replacement for those more expensive hobbies,” says Festi.
Make free your favorite word
If you have never paid much attention to BOGO, (buy one get one free), do so. Stock up and use sparingly and you'll find you shop less and therefore spend less. Attend free events. There are a lot of free events in most every community. Watch for those concerts, lectures, and other events that you can take in for nothing, yet still have a good time.
Work part time
Any dollar you can get from somewhere other than your retirement portfolio is a plus. You're not looking to make a killing, but just to give yourself a little breathing room. Make it sweeter by seeking fulfilling positions that will also put money in your pocket. “Work as a substitute teacher at a public or private school, serve as a greeter at a restaurant where your family and friends often gather, or share your passion for books by working a few hours at a neighborhood book store,” suggests Ravenna. You could also serve yourself up as a tutor. If you don't want to commit to a steady part-time gig, consider temping.
Sure many times businesses are big on promoting their senior discounts, but not always. Some kind of grudgingly offer them, so unless you ask, they aren't going to go out of their way to let you know it's available. Don't be shy. Always ask whether there's a discount for seniors. A few dollars here, a few dollars there, and soon you're talking real savings.
No one can completely control their health, but do the right thing for your body and you stand a better chance that it will do well by you. Exercise, eat like your mother told you, and maybe you can keep illness to a minimum, and that for sure is one the single best ways you can improve your cash flow.