For many workers, the path to retirement is well-defined. You build a successful career, earning promotions and pay raises over time. You contribute to your 401(k), IRA, and other accounts, gradually increasing your net worth. The goal is to minimize your reliance on debt, live within your means, and accumulate enough assets to fund a long and enjoyable retirement.
Sometimes the traditional path doesn’t go quite according to plan, though. Unexpected costs and emergencies happen. A medical issue could generate sizable health care costs. You may have to pay for costly home repairs. Market volatility could threaten your savings efforts. You could experience a career disruption that limits your ability to save for retirement.
As you approach retirement, you may find that you haven’t saved as much as you’d hoped. In fact, your retirement plans could be in jeopardy. If you’re already saving as much as possible and still face a retirement shortfall, it may be time for some out-of-the-box thinking.
Below are three creative ways to fund some of your retirement expenses and eliminate a savings gap. You could use these strategies to generate side income, boost your retirement savings or simply provide a little financial breathing room. Be creative and consider how you could implement strategies like these into your retirement plan.
Downsize your home to downsize your spending.
What if you could boost your retirement savings and cut your expenses with one simple decision? That may be an option if you have a sizable home with a considerable amount of equity accumulated. If you’re like many Americans, your home accounts a significant portion of both your net worth and your living expenses.
You could substantially reduce your monthly expenses by selling your home and downsizing to a smaller one. A smaller home often leads to reduced costs for things like mortgage payments, maintenance, taxes, insurance, utilities, and more.
Also, if you have substantial equity in your home, you could use some of the proceeds from the sale to bolster your retirement savings. Those savings could help you continue to grow your assets or generate additional retirement income in the future.
Tap into your life insurance cash value.
Life insurance is a fundamental component of any financial plan. It provides financial protection to your loved ones in the event of your death. However, if your kids are grown, they may not be as financially dependent on you as they were in the past. If so, that could give you flexibility to use your life insurance for other purposes, such as generating supplemental retirement income.
There are a couple ways to use life insurance cash value to create tax-efficient income. One is to take your premiums out of the policy as tax-free withdrawals. Another option is to take loan distributions, which allows you to tap into the policy’s growth on a tax-free basis. Technically, the loan has to be repaid. If it isn’t repaid when you pass away, however, the balance is deducted from your death benefit.
Turn your hobby into an income stream.
Do you plan to use retirement to pursue a favorite passion or hobby? If so, consider turning that hobby into a source of side income. You might work part-time for a business related to your hobby. For example, if you love golf, you could work as a starter or an attendant at a local course. If you love gardening, you could work at an area nursery. No matter what your passion is, there are likely opportunities to work in that field in some capacity.
If you want a job with schedule flexibility, you could consider coaching, teaching or consulting others who may be interested in your hobby or passion. For instance, if you love music or art, you could offer lessons to children and adults in your neighborhood. You could also sell training or coaching online in your area of expertise.
Ready to chart your nontraditional path to funding retirement? Let’s talk about it. Contact us at Gallagher Financial Group. We can help you identify both traditional and nontraditional funding strategies. Let’s connect soon and start the conversation.
Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice.
Advisory Services offered through Change Path, LLC an Investment Advisor. Gallagher Financial Group and Change Path, LLC are not affiliated.
16766 - 2017/6/20