While retirement offers benefits like more time, it can also be costly. According to Investopedia, to know the amount you need to leave the workforce or business comfortably is to divide your estimated expenses by 0.04%. If your estimated annual spending is $70,000, then you should have at least $1.75 million.
Because retiring can be expensive, you need to learn a few ways to generate and even increase your income with the least effort. Here are four ideas:
1. Sell or Transfer Business Ownership
If you’re a business owner who wants to retire, you can consider implementing your exit strategy, which may involve selling the entire business to somebody else. You will lose any control, but you can look forward to a massive payout depending on the valuation.
If you still want to keep part ownership, you can offer business rights. In this manner, you can still receive regular income even if you are no longer in charge of the operations.
When you want to sell or transfer your business, you can approach competitors. However, if your company is in Utah, consider talking to a company that can sell a business to spare you the hassle and headache.
2. Use Your Retirement Savings and Accounts
If you have participated in any retirement or pension plan offered by your company and financial institutions, you have something to withdraw once you retire. Some popular retirement savings options include:
- 401k plans
- Individual retirement accounts (IRAs), such as traditional and Roth
- Pension plans
- Unit-linked life insurance
Just remember the following:
- If you’re earning from investing your retirement accounts, you might need to declare it to the IRS and pay the corresponding tax. The payment of tax can also be deferred, which means you settle it once you withdraw the money, not while investment income is growing.
- Many plans have a minimum age in which you can withdraw money without paying penalties.
- Some might force you to make distributions. For example, withdrawing from your traditional IRA is mandatory once you reach 70.5 years old.
3. Invest and Diversify Your Portfolio
Investing is the perfect complement to your retirement savings. It lets you grow your assets so you can continue to earn passive income for years. You can also pursue various investment options:
- Treasury and municipal bonds
- Mutual funds
- Real estate investment trust funds
- Index funds
- Real estate
Note, though, that not all these might be worth it. It depends on many factors, such as age, risk appetite, and risk profile. You can talk to a financial planner to help you figure out the best portfolios for your needs and budget.
4. Consider Part-Time Work
Do you know many retirees are going back to the workforce or at least planning to? According to a survey, 27% would like to work part-time while 19% already did it. Meanwhile, 17% would like to reduce their working hours before they retire fully.
In the coming years, thousands of older adults will retire. It will leave a significant gap in the workforce that can take a while to fill. Working at least part-time will help you generate income, do something you like, and still manage or control your time.
Just because you’re retiring doesn’t mean expenses will stop coming. The excellent news is you have many ways to earn without sacrificing time and enjoyment.