Thursday, March 5, 2015

Increase Your Retirement Income

Many who are planning their retirement or who have already retired won't be able to live the lifestyle they had hoped for during these years. It’s important to look at ways to increase retirement income in addition to saving and investing more.

Because of the substantially longer lifespan of today’s retirees and the anticipated increased expenditures on health care over the coming years, savings and investments are more likely to be diminished or exhausted as you near the end of your retirement years. This makes planning to increase retirement income all the more important.

The suggestions covered in this article represent areas you may very well be aware of, but hopefully provide additional information and resources making your planning and decision processes a bit easier.

Annuities can be considered a form of "reverse insurance" that create income you can use later in life or after you’re retired. They’ve been referred to as a "private pension" that you can purchase to create regular income after you retire.

Annuities are tax-deferred mutual-fund-like investments. There are no annual contribution limits, contributions can be made in a lump sum or over time, and the payouts can be immediate or deferred.
Before purchasing an annuity, it’s important that you carefully read your annuity contract before investing. Also, learn the terminology. Don’t let annuity jargon bait you into a policy you don’t want.

Reverse mortgages
Reverse mortgages convert equity in your home into income. It is similar to a home loan but instead of making payments to the lender, the lender makes payments to you.

According to the Federal Trade Commission: If you're 62 or older — and looking for money to finance a home improvement, pay off your current mortgage, supplement your retirement income, or pay for health-care expenses — you can consider a reverse mortgage. It's a product that allows you to convert part of the equity in your home into cash without having to sell your home or pay additional monthly bills.
There are three types of reverse mortgages:
  1. Single-purpose reverse mortgages, offered by some state and local government agencies and nonprofit organizations.
  2. Federally-insured reverse mortgages, known as Home Equity Conversion Mortgages (HECMs) and backed by HUD. Private loans that are backed by the companies that develop them.
  3.  Structured settlementsStructured settlements involve accelerating/selling the collection of moneys owed [such as a damages awards from a personal injury tort claim] into a discounted lump sum payment. As an example if you're injured in an accident and receive a $500,000 settlement from the insurance company, it's tax free. If you then invest this money the earnings you receive are taxable. If you take the money as structured settlement instead of cash, you will receive payments over a period of years or your lifetime (your choice) and each payment is tax free. A structured settlement actually converts your after-tax earnings into a tax free return.

Post retirement work
Post retirement work is a job in which you receive compensation as an employee or self-employed individual.

In February, an informal poll of roughly 400 RetiredBrains visitors found that 14% had started their own businesses and 37% were working full time, part-time, temporary, seasonal or some combination. Click here for job seeker information

Note that there may be an impact on Social Security benefits — both income and health.

Delaying Social Security benefits
If your benefits at full retirement age are $1,000 a month, you’ll see that figure fall to $750 if you start collecting at 62 and leap to $1,320 if you hold off till age 70, according to Social Security.

For a breakdown of how benefits increase from year to year from U.S. News & World Report’s “Your Guide to Social Security.” Click here.

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