Supplemental Retirement Income

If your main sources of retirement income are not enough, you need to find supplemental retirement income sources to make up for your income needs during retirement.

Then how will you achieve the retirement you dream of?

Whatever your dreams, you will need money to make them come true.

Main retirement income sources

• Social Security benefits  Social security benefits provide a base amount of monthly income, depending on your earnings history and age when benefits begin. If you take monthly benefits before your full retirement age, you may get a reduced benefit.
• Pensions and Individual Retirement Accounts  Defined benefit pensions pay a promised monthly benefit. Defined contribution accounts such as 401k, 403b differ in that the balance at retirement determines the retirement benefit. If you don’t have any employer plans, you can open ‘traditional’ or ‘Roth’ IRA accounts.
• Personal savings and investments
  • Savings accounts, CDs and money market funds
  • Stocks, bonds and mutual funds
  • Real estate and real estate investment trusts (REITs)

In fact, how much supplemental income you will need depends on your basic living expenses. If all of your basic needs are covered by your main income sources, you may feel comfortable and enjoy the retirement life.

However, you should know the risks that can derail the success of your current retirement income plan.

• Reduced benefits  You should not consider the Social Security benefits system as your sole means of support after the working years have ended. The funds are being depleted because of the growing number of retirees and expected to be reduced in the near future.
• Inflation  As people live longer, you should not underestimate the impact of inflation. If your income generating assets don’t grow and outpace inflation, you may be exposed to the risk of outliving your assets.
• Higher health care costs  At your retirement age, you need to prepare for large amount of health care expenses. If you don’t have adequate insurances, your medical bill may bite into your assets.

Supplemental Retirement Income

There may be several sources of potential retirement income available to people looking toward a comfortable retirement free from financial concerns.

Generally, the best solution is to begin preparations as early as possible and to put aside as much as possible.

However, whether you are already retired or years away from retirement, you can still create your supplemental retirement income.

• Annuities  An annuity offers tax-deferred growth and a variety of payout options, including payments guaranteed to last for your lifetime or until the death of your spouse. Some variable annuities give opportunities to increase your annual income as your account value grows once you begin taking payments.
• Retirement jobs  You may not have a lump sum money to buy annuities. Or you may want to remain active and do what you’ve dreamt to do. You can work full or part-time. However, you need to know that your Social Security benefits may be subject to federal income tax if you earn above $25,000 (for single) or $32,000 (for married couple).
• Home based business  After retirement, you may want to enjoy freedom from the 9-to-5 routine and work at your own pace. What if you can turn your work experiences, interests and even hobbies into a business for supplemental retirement income… If you use the Internet, you can start your own home business for just a dollar a day.