Tuesday, November 23, 2010
Retirees need to budget carefully to stay within their fixed income. If the value of their investments sinks after retirement, seniors often have little choice but to spend less or return to the workforce. But there are plenty of ways to make a little of extra cash without having to deal with an alarm clock and a commute. Here are a few creative ways to boost your retirement income.
Sell your stuff. Retirees have a lifetime's worth of accumulated clothes, books, and furniture. Make some quick cash by holding a garage sale or selling your stuff on eBay or Craigslist. Take clothes to a consignment shop and a box of books to your nearest used book store. Downsizing from two cars to one can also give your monthly budget a significant one-time boost. Savvy sellers can purchase underpriced used goods and resell them at a higher rate.
Market your skills. Whether you know how to hem and alter clothing, research family genealogy, or troubleshoot computers, someone in your neighborhood is likely to pay for your skills. Put an ad in your local newspaper, hang a flier on a community bulletin board, or offer your services online.
Get a higher interest rate. As you age, you'll want to keep a significant amount of your savings outside of the stock market. Shop around for the best interest rate on certificates of deposit, bonds, and savings accounts. Consider an online saving account, which will likely offer a higher interest rate than the brick-and-mortar variety.
Prune your investments. Review your investment portfolio and get rid of funds that consistently perform poorly. Also, "identify investments that have high expenses and transfer that money into a comparable investment that has lower management fees and expenses," says Eric Tyson, a financial planner and coauthor of Personal Finance For Seniors For Dummies.
Maximize Social Security. The age you sign up for Social Security can make a big difference in the size of your checks. For Americans born in 1943 or later, Social Security payments increase by 8 percent for each year you delay claiming between ages 62 and 70. "If you have good health, you will generally be better not taking the benefits early," says Tyson. "If you have a health problem or have some reason to believe you won't have a long life expectancy, that might be a reason to take Social Security a little bit earlier." Retirees who have already claimed their benefits still have an opportunity to boost their checks. Seniors who pay back the entire amount received without interest can then reclaim at the higher rate.
Utilize Medicare benefits. Sign up for Medicare Part B at age 65 to avoid a 10 percent premium increase for each year of delayed enrollment. Shop around annually for the most economical Medicare Part D prescription drug plan that meets your medication needs. And take advantage of the new services Medicare will soon begin covering. Beneficiaries will no longer have to pay any out-of-pocket costs for most preventive care, including an annual wellness visit beginning in January 2011.
Get a rewards credit card. You're going to continue to spend on food, clothing, and gas. You might as well get a credit card that pays you 1 to 2 percent cash back on your everyday purchases. "If you look around, you can find a no fee card that gives you some benefit," says Tyson. But he cautions: "A lot of the rewards card sock you with annual fees and get you some other way." Of course, if you carry a credit card balance, the extra cash will be lost.
Consult. Put your lifetime of accumulated experience to work by taking on consulting work. "By the time you are in your 50s, you probably know people from a variety of companies based on where you've been," says Mark Miller, publisher of RetirementRevised.com and author of The Hard Times Guide to Retirement Security: Practical Strategies for Money, Work, and Living. "You can go out and do project-based stuff. It is a way to gain flexibility and set you own schedule and work from a home office."
Tutor. Consider offering to help teach children algebra, a foreign language, test preparation, or even drilling younger students on their multiplication tables. "People continue to spend on their kids," says Tyson. "If there is a service you can provide to parents to help them with their kids, such as tutoring kids, your skills will be in demand." Sports fans may be able to land a gig coaching or refereeing youth games or giving golf lessons. And those with teaching credentials may substitute teach or instruct a class at a local community college.
Babysit. Help harried working parents by offering babysitting services. Or better yet, work out an arrangement to get paid to spend time with your own grandchildren. "When I was working and had young children, I paid my mother to babysit," says Jan Cullinane, coauthor of The New Retirement: The Ultimate Guide to the Rest of Your Life. "The kids couldn't have had a better caregiver and she did the laundry for me as well."
Eldercare. At the other end of the aging spectrum, you can provide nonmedical eldercare services for an older retiree. "You go to someone's house and you help them out with lunch, light housekeeping, and take them to appointments," says Cullinane. "Basically you help keep someone's elderly parent company."
Hobbies and crafts. Turn your hobby or craft into a stream of income. Offer to frame pictures, make scrapbooks, or sell your hand-crocheted doilies online. "If you love making jewelry and can sell it to little boutiques, you can make a little business out of it," says Cullinane.
Rent out your space. Retirees who live in big cities or vacation destinations can rent out rooms to travelers. When you leave town, you can lease out the entire house. If you don't want to share your space, consider renting out your garage or basement as storage space.
Blog. Pick a topic that interests you and start researching and writing posts online. The more hits you generate, the more money you will make if you have advertising on the site. Strive to make enough to pay for your Internet connection.
Temp. Employers reluctant to hire new full-time workers with benefits may increasingly rely on short-term help. Temporary jobs and project assignments can be ideal for seniors who want to bring in some income but also enjoy a significant amount of leisure time. Contact a temp agency about short-term projects, seasonal work, or a job filling in for employees who are on vacation or maternity leave.
Garden. Avid gardeners can sell their excess fruits, vegetables, and flowers to farmer's markets, local garden centers, or even neighbors. Alternatively, you could help others learn to prune their rose bushes or select the ideal plants for a sunny spot. Outdoor lovers who don't mind mowing lawns and weeding are sure to find eager customers.
Errands. Retirees who are handy around the house will never be without extra cash. Other easy errands you could provide include grocery shopping, rides to the airport, and picking up dry cleaning.
Cook. Bake sales aren't just for children's fund raisers. Try selling freshly bakes pies, bread, or cookies at local events. If you're more of a cook than a baker, jams, sauces, and even prepared meals could be easy to sell to busy workers.
Pet sit. Animal lovers should have no problem making a few dog walking or grooming. Also consider pet sitting when owners go on vacation or travel for work.
Tour guide. History buffs should look into a post-retirement job as a guide at a local museum or historical monument. A part-time tour guide position will allow you to share your knowledge with others and interact with tourists from throughout the world.
Ask for discounts. Some senior discounts are well publicized, but others are only available to those who ask. One of the best perks of getting older is getting a discount simply because you're willing to admit your age.
Voluntary early retirement before the age of forty is not typical. Leaving work behind as early as possible to focus on other aspects of life is a popular goal, but most people will not achieve it.
In order to retire in your forties and still have the funds you need to finance all that you'd like to do, you need to create the right environment to foster extraordinary results with your money. Don't count on winning the lottery or selling the company you built in your basement to Google.
Those who leave the workforce before age forty compose a small percentage of the working population, just as Olympic-level swimmers are a small percentage of everyone who competes in the sport. To achieve in the Olympic Games you need to take several extreme actions. To retire early, you will have to do the same. These tips may help you generate enough money to retire before age forty.
Ignore what other people think. You'll need the right mindset. As you make choices that could lead you to extreme early retirement, you may face resistance from family and friends. The decisions you will need to make are often directly opposed with others' expectations. Find like-minded individuals whose advice and encouragement will help move you in the right direction.
Save as much as possible as soon as possible. This is the first of your unpopular decisions. You will need to sacrifice your spending at the beginning of your career in order to have a better chance of living the way you want when you want, with financial freedom, for a longer amount of time. To you, frugality should be elevated to an art form. Your friends may call you cheap, but you won't care because you are focused on your goal without distraction.
Earn as much as possible as quickly as possible. With more income, you can keep more money in high-yield savings accounts and investments. Those funds will be ready for your early retirement. While it's the amount you save that matters, you can significantly extend those savings by earning more. Work more hours or take an additional job or two. Olympic athletes train and practice constantly and this is the same intensity you need to achieve an early retirement.
Avoid fees while investing. While this concept is one part of saving as much as possible, it deserves its own mention. Most investments underperform index funds and you'll pay higher fees for those lackluster results. While some investments do beat the market, you won't know which investments will skyrocket until it's too late. Invest in index funds and make sure you have a sensible mix of asset classes that present a good chance of protecting you from down markets when you need the money you've invested.
Consider a new definition of retirement. You may still want to work in retirement to earn additional money, particularly if you can do work you enjoy. Consider a part-time job or even a full-time job with a non-profit organization aligned with your interests and values. Leaving the corporate world to work for an organization you care about can be exhilarating and you will enjoy the work. Extreme early retirement is an achievement most people will not accomplish, even if you put forth a good effort. Leaving the workforce behind before the age of forty is an extraordinary accomplishment and it requires dedication, intensity, and a willingness to live differently.
Luke Landes writes for Consumerism Commentary, where he encourages discussions about money and consumer issues. Consumerism Commentary regularly tracks and reviews the best online savings accounts and other financial products and other financial products.
Everyone looks for simple ways to save, especially in today's tumultuous economy. Bankrate asked two frugal bloggers to share their thoughts on some nearly effortless ways to hang on to your hard-earned green. If you take their advice to heart, you'll likely save at least $100 a month around the house.
Rethink Your Phone Service
Fed up with expensive telephone bills? Jonni McCoy, author of the Miserly Moms website, recommends switching to an alternative phone service like magicJack or Skype.
Such services allow you to make local and long-distance calls for a fraction of the price of traditional phone service. For instance, magicJack customers can get phone service for as little as $19.95 a year, while Skype calls are free to other Skype users.
"These are good alternatives to (traditional) phone service, and they include long distance, so no extra card is needed," McCoy says.
Customers nervous about dropping their traditional phone carrier have other options for saving money.
For example, consider canceling long-distance service from your phone carrier and using calling cards instead, says Susan Palmquist, creator of money blog The Budget Smart Girl's Guide to the Universe.
Need a second phone line? In this case, a service like magicJack works well, because it's "much cheaper than adding a second line to your existing phone account," Palmquist says.
When it comes to your monthly cell phone bill, save money by cutting down on your minutes and switching to a more basic plan. Palmquist recommends switching to a pay-as-you-go cell phone.
Cut Down on Electricity
Each month, utility bills silently drain a little more cash from your wallet, preventing you from building a sizable emergency fund or retirement nest egg.
There are several ways to trim these bills. Three quick and painless ways to save include: switching to compact fluorescent light bulbs (which are more energy-efficient than standard light bulbs) lowering the temperature on your hot water heater (130 degrees Fahrenheit is enough to kill germs) and drying your clothing on a clothesline or rack whenever possible.
McCoy and Palmquist also recommend signing up for any incentive or rebate programs offered by the local utility company.
With these programs, you typically agree to allow the power company to briefly shut off certain appliances when energy demand is particularly high. In return, you get a credit on your monthly bill.
For example, customers who participate in Florida Power & Light's On Call Savings Program allow FPL to install a small device on their water heater and air conditioner compressor. This allows the utility company to periodically borrow electricity for 15 minutes or so.
Palmquist -- who lives in Minneapolis and gets her power from Xcel Energy -- does this and gets a 15 percent discount on her bills.
Are you drowning in monthly water bills? Palmquist and McCoy recommend money-saving options such as washing all clothing in cold water.
"I use cold water to wash clothes, and recently read that using the delicate cycle also saves water, too," Palmquist says.
In some cases, saving cash actually goes hand in hand with superior performance, Palmquist says.
"We installed a low-flow shower head in the main bathroom and find it not only saves water, but the flow is better than the old one," she says.
Of course, another "no-brainer" way to save is simply to use appliances less frequently. Wait until you have a full load before running the washing machine, dryer or dishwasher.
Don't overlook water-saving tips for outside the home. Palmquist plans to invest in a rain barrel for outside watering next year. Meanwhile, McCoy recommends making changes to landscaping "so there is less lawn to water."
Bundle or Drop Cable and Internet
McCoy suggests saving money by bundling cable and Internet services. Palmquist agrees, and recently switched to an "economy package" for her TV service.
However, Palmquist says it's important to look before you leap into bundling.
"Sometimes it's more expensive and they can lock you into a two-year contract, so check out everything first," she says.
If you're really gung-ho about saving, simply drop cable altogether. Perhaps you can watch your favorite TV shows for free on an Internet site such as Hulu.com.
Or, maybe it's time to simply give up those expensive TV habits and think about the priorities that really matter to you.
"My main advice is to think about wants and needs," Palmquist says. "Many of us think something's a necessity when really it's just a want."