Every retirement authority seems to echo the same advice: Hold off on claiming your Social Security retirement benefits until you hit your full retirement age (FRA). The rationale behind this unanimity lies in the fact that taking benefits prematurely before reaching FRA leads to permanently reduced benefits, posing a significant financial challenge as you age.
But what if waiting until FRA isn’t financially feasible for you? While these retirement experts may frown upon early benefit claims, are they providing viable solutions to tide you over until you reach FRA?
Fortunately, there are legitimate avenues to generate income while awaiting your full retirement age, and none involve resorting to extreme measures. Here are four strategies to bolster your finances during the interim period before reaching FRA.
Utilize your home equity through a reverse mortgage: A reverse mortgage enables homeowners aged 62 and above, who own their homes outright or have substantial equity, to access their home’s equity in either a lump sum or regular installments while continuing to reside in the property.
If your knowledge of reverse mortgages is solely derived from appealing commercials featuring seniors, you might assume it’s a flawless solution. However, reverse mortgages entail costs, and it’s crucial for homeowners to grasp the terms before committing.
For starters, similar to conventional mortgages, reverse mortgages involve closing costs. Expect to cover an origination fee around 2% of the home’s value, an initial mortgage insurance premium, and standard closing expenses. Furthermore, throughout the loan term, anticipate annual mortgage insurance premiums and monthly servicing fees.
It’s imperative to recognize that your reverse mortgage can become due under various circumstances:
- Selling the house
- Decease of the homeowner
- Inability to maintain the property as a primary residence, particularly if prolonged stay in a nursing home occurs, exceeding 12 months
- Failure to pay property taxes, maintain adequate homeowners’ insurance, or upkeep the property appropriately
While reverse mortgages can serve as a lifeline for seniors bridging the gap until full retirement age, they aren’t a panacea. If there’s a risk of struggling with maintenance costs, requiring long-term off-site care, or if your children anticipate inheriting the property, this might not be the best solution for you.
Utilize Your Assets for Additional Income
You may not have an extra property lying around, but there are still opportunities to earn money by renting out your space or belongings. If you reside in a tourist hotspot, listing a spare room or your entire home on Airbnb can be a lucrative option. While hosting guests, you could also offer house or pet sitting services to further maximize your earnings.
Beyond traditional lodging, consider renting out other assets you own. If your car sits idle most days, platforms like Getaround or Turo allow you to rent it out. Similarly, if you have unused parking space or equipment like power tools or sporting gear, services such as Parking Panda, Spot, Loanables, or RentNotBuy offer avenues to monetize these assets.
Embrace Supplementary Work
While the idea of working during retirement might not be appealing, modern side gigs offer flexibility and can align with your interests. Monetizing hobbies, like providing gardening advice, dog-walking services, or selling handmade crafts, can generate income without feeling like traditional work. Alternatively, capitalize on your expertise or skills by offering consulting services, such as fashion styling or car-buying guidance, catering to your strengths and schedule.
Declutter and Profit
Selling items online through platforms like Craigslist or eBay presents an opportunity to downsize your possessions while earning extra cash. Items from your past, now considered vintage, could fetch a decent price. This process not only helps streamline your belongings for retirement but also boosts your financial resources.
Navigating to Full Retirement Age
While waiting for your full retirement age (FRA) may feel daunting, delaying Social Security benefits ultimately leads to higher monthly payments. By exploring alternative income streams during this period, you ensure a more financially secure retirement, even if it deviates from your initial vision.
