In past generations, older adults looked to retire with three sources of income: savings, pensions, and Social Security. But no longer. With the decline of company pensions and financial markets taking a hit during the economic downturn, many seniors face less income than anticipated in retirement.
Here are 5 money management tips to boost your income and savings.
1. Consider delaying retirement
Did you know that by delaying the age you start to receive Social Security benefits, you can increase your benefit amount? While today’s retirement age is 66, if you wait until age 70 or later to take Social Security, you could see a significant increase in your monthly payment. Check the Social Security fact sheet When to Start Receiving Retirement Benefits to learn more about this important decision.
2. Determine whether it makes sense to go back to work
Even if you’ve already stopped working and started getting Social Security, a part- or full-time job can help offset extra expenses. American Job Centers are available in communities across the U.S. and can help you seek employment and access computers for free. Find a center in your area.
Mature workers aged 55+ with very limited or no income might consider the Senior Community Service Employment Program (SCSEP). SCSEP provides training and part-time community service work that for most people leads to full-time jobs.
3. See if other programs can help with your expenses
Depending on your income, you might be eligible for help from public and private programs that can help pay for your health care, prescriptions, food, utilities, and more. Use NCOA’s free screening tool BenefitsCheckUp® to see if you may qualify for any of these programs.
4. Consider tapping your home equity
If you own your home, you may want to consider freeing up income by tapping into your home equity. There are several ways to do this, including taking out a home equity loan, a home equity line of credit (HELOC), or a reverse mortgage.
A home equity loan, sometimes called a second mortgage, gives you a lump sum of money with a fixed repayment schedule. This type of loan could be a good choice if you have a home improvement project or if you want to consolidate debt. A HELOC allows you to get money when you need extra cash and only pay interest on the amount that you borrow. HELOCs make sense if you want a “rainy day” fund or cash to pay for major purchases like a new furnace. Learn more about home equity loans and HELOCs from the Federal Trade Commission.
A reverse mortgage is a type of home loan that allows seniors to convert the equity in their home to cash to meet a wide range of financial needs. With a reverse mortgage, the lender pays you. The homeowner makes no payments, and all interest is added to the loan. A reverse mortgage must be repaid when you move or sell the property or the last borrower dies, or by your heirs upon your death.
To get unbiased information about reverse mortgages, read Use Your Home to Stay at Home©, the official booklet approved by the U.S. Department of Housing and Urban Development. Before you agree to a reverse mortgage, you will be required to get counseling from a government-approved organization like NCOA. Learn more about reverse mortgage counseling.
5. Get financial help from family
If you need cash to pay for medical bills or caregiver expenses, asking your family for support might be a good way to preserve this asset. Adult children need to be careful that these extra costs do not disrupt their financial plans and their ability to save for their own retirement. It is often difficult but important for families to discuss finances and options realistically.
The government has made it less costly for families to pay medical bills or elder care if the taxpayer can claim an elderly relative as a dependent. This can make it easier to support older relatives who want to stay at home. It also helps ease the burden that caregiving can place on your family. Find out more about these deductions in IRS Publication 502.