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4 Ways to Create More Spending Money in Retirement — The Motley Fool

Retirement is a happy and exciting time, but it can also be stressful if you are not financially prepared. Money is reported to be the main source of stress among American adults, according to a Northwestern Mutual survey, and only about a quarter of US households are reported to be homeless. UU They consider themselves financially healthy, according to a Financial Health Network report.

If you are worried about having enough money to last until your retirement, there are some things you can do to strengthen your savings and ensure that your money stretches as much as possible in your golden years.

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Image source: Getty Images.

1. Delay in claiming Social Security benefits.

According to a report by the Nationwide Retirement Institute, approximately 9 out of 10 recently retired adults say they claimed Social Security at age 62. While you can claim benefits after age 62, you will receive more per month if you wait to apply.

For each month it takes to claim benefits beyond age 62, you will receive slightly larger checks each month. When you wait until your full retirement age (FRA), which is 66 years, 67 years or somewhere in between, you will receive the full amount to which you are entitled. If you continue to wait beyond your FRA (up to age 70), you will receive a bonus amount in addition to your full benefits.

The biggest benefit of delaying benefits is that you will receive those larger checks. for life. Therefore, even if you live to be 110 years old, you will still receive more each month for waiting than if you had claimed the benefits before.

These additional benefits can also make a significant difference. For example, let's say that your FRA is 67 years old and by claiming at that age, you would receive $ 1,500 per month. If you claim at age 62, you would receive 30% less each month, or $ 1,050. However, wait until age 70 to claim and you will receive a 24% increase, or $ 1,860 per month. If you're struggling to make ends meet, those few hundred extra dollars per month could be a big help.

2. Pay off your debt before you retire

To maximize your discretionary spending on retirement, you should minimize your necessary subsistence expenses, which include repayments of the debt. If you can eliminate your mortgage, car loans, student loans and credit card debts, you will have much more money to spend on retirement.

If you can not pay all your debt before you retire, at least aim to face any high interest debt. This type of debt, such as credit card debt, is incredibly toxic and expensive and could cost you thousands of dollars in interest over time. And if you are spending thousands of dollars in interest when you live on a fixed income in your retirement, you will not have as much to spend on the things you enjoy.

To determine which of your debts to eliminate first, prioritize them according to your interest rates. Pay first the debt with the highest interest rate, even if it is not your highest balance, then descend from the list until you are debt free. If possible, it may be a good idea to suspend retirement until most of your debt is paid, especially if your savings are scarce and a good portion of your retirement income each month will be used to pay off the debt. But if you still pay the debt when you retire, make sure it's a debt with lower interest, such as a mortgage.

3. Collect a part-time job

These days, it's easier than ever to start a bustle at any age to earn some extra money each month. And the best part is that, for many of these jobs, you can work as much or as little as you want, so you can still enjoy a flexible retirement calendar.

From walking dogs to becoming a Uber or Lyft As a driver to do consulting work, there are many part-time opportunities to earn some extra money. You can even choose to start a business in retirement, and something as simple as selling your handmade crafts on Etsy can help generate extra income. Sometimes, even a couple of hundred extra dollars a month can make the difference between thriving and simply surviving.

However, keep in mind that if you are claiming Social Security benefits before your FRA, the work could reduce the amount of your benefit, at least temporarily. In the years prior to your FRA, your benefits will be reduced by $ 1 for every $ 2 you earn above the income limit of $ 17,640 in 2019. Then, in the year you reach your FRA, you will be deducted $ 1 from your benefits for every $ 3 you earn above $ 46,920.

Once you finally reach your FRA, your benefit amount will be recalculated to take into account the reductions you received while working. Therefore, while you are not technically losing money, it is an important factor to consider if you plan to claim Social Security early and continue working.

4. Consider finding more affordable housing

Housing expenses are one of the biggest costs you will face each month of retirement. Even if you have paid your mortgage in full, you still face property taxes, insurance and utilities. And if the children moved and you are left with more home than you need, you may be spending more than you need in the home, leaving you less money for fun retirement activities.

If you are willing to move, finding a more affordable home, either in the city or throughout the country, can be a wise financial decision. Sometimes, you can even move to an ideal retirement location and still reduce your monthly expenses. If money is scarce in retirement, there are some cities in the US. UU In which you can survive only with Social Security benefits and still be able to spend your golden years comfortably.

However, before packing and moving, be sure to weigh the advantages and disadvantages of finding a new home. For example, are you moving away from family and friends? If so, will that overcome the financial advantages? Also, how will taxes affect your monthly payments? For example, some areas may charge higher property taxes, but several states do not have state income taxes, so you may still be saving money by moving to one of those states. Consider all the pros and cons and plan a new budget for your potential new city to get an idea of ​​what the costs will be like, which will ensure that you make the best decision.

If your savings are not where you want them to be and you are approaching retirement age, all hope is not lost. There are ways to increase your disposable income and save a few cents so that your money lasts as long as possible. By doing so, you will give yourself the best chance to enjoy the retirement of your dreams.

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