Strategies for More Income in Retirement

Matthew Mullowney |

Retirement is a time to enjoy your life, not struggle with money. It's also a time when many people are faced with whether or not to begin drawing on their retirement accounts. You may need more income in retirement than when you were working because, unless your spouse is a high-income earner, the tax savings of two working people are now gone. If you're looking for strategies for making more income in retirement, then read on.


Save more

When you're working, you can take money out of your paycheck before taxes are taken out. At retirement, there's no such option. Some people think saving more is impossible because they won't have much in their retirement accounts. Others believe that it will be hard to save more than what they're currently taking from Social Security and pensions because they will be drawing from pensions and more Social Security in retirement.

The keyword here is "more". You don't have to save a huge amount more. You have to keep what you can and be sure not to drop your savings rate in retirement. The easiest way to increase your savings rate is by increasing your 401(k) contributions – up to the point that it reduces your take-home pay.



If you're like most retirees, you may have a home that's too big for your needs. Downsizing to a smaller home can lead to more income in retirement. If you sell your current home and put the proceeds into a savings account, you could have an additional source of income down the road. If health issues arise, downsizing could be essential before you run out of money and need Medicaid to pay for nursing care or assisted living.


Tax efficiency

Many retirees have significant holdings in taxable accounts. Your income tax rate will be lower in retirement, but this may not lead to lower taxes during the year because of the 3.8% Medicare surtax on income over $200,000 (for singles) and $250,000 (for couples). In addition, your minimum required distributions will be treated as ordinary income. You could sell loser securities in taxable accounts to offset gains or investment income that tends to be taxed at higher rates.


Raise financially independent children

There's nothing wrong with passing the torch of financial responsibility to your children, but it's also a way to ensure you can make more money in retirement. If you have a child who needs to complete a degree before starting their career, you could keep them in your house for free for long periods. Even if they don't need your home, it could be an additional source of income.


Stay Healthy

As you age, you're at increased risk for various health issues. Many retirees find it harder to get around or have multiple aches and pains that cause them to take it easy. If nothing else, staying healthy will help ensure you don't accidentally use more money than you can afford on unreimbursed medical expenses.


It's not just about health care costs but also prescription drugs. If you have high-cost prescription drugs and health insurance, it's a considerable expense. If you can keep your prescriptions for common medicines, you might want to ask your physician if there is a cheaper generic version of the medication. A generic drug eliminates insurance costs, the need to keep up with drug samples, and the worry that the medicine has been recalled because of some unnoticed contamination.


Home is a safe-haven


It's not uncommon for people to believe that financial institutions or employers will take away their Social Security because they don't contribute enough. It's important to appreciate that your house is still your haven. It's also much easier to move out of a rental property and into your own home than to move out of your house and into a rental property.


If you're in a state where taxes on retirement income are high, consider selling some assets and converting the proceeds into retirement income. Saving for retirement can be a challenge, but it's the only way to ensure that you don't run out of money in retirement. You may think you won't have enough money to retire comfortably, but if you carefully plan and choose wisely, there are ways you can increase your income in retirement.


Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.