5 Unexpected Sources of Retirement Income — All Related to Your Home – Motley Fool

Posted: December 22, 2020 at 7:01 pm


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Most Americans approaching retirement have not saved nearly enough. More than a third of those 55 and older have socked away less than $100,000, and about 60% have saved less than $250,000 (perthe 2019 Retirement Confidence Survey). Clearly, even factoring in Social Security income, most people will need additional sources of retirement income.

The good news is that there are a lot of ways to generate retirement income, such as working for a few more years and tapping life insurance policies. Here are five sources of retirement income, all of which relate to your home.

Image source: Getty Images.

One way to generate income from your home is to occasionally (or frequently) rent out parts of it -- or all of it -- via a service such as Airbnb or VRBO.com. This is a particularly powerful strategy if you live in an area where many business or vacation travelers might like to stay, such as in a big city or by a beach. As an example, last year (pre-pandemic), the average daily Airbnb rate in Steamboat Springs, Colorado -- a skiing hotspot -- was around $450, while in Boston, it was $266.

You might be able to take this strategy further, if you want, by taking in a boarder. If someone rents a room in your home and pays you, say, $500 per month, you're looking at $6,000 in extra income. Plus, when you're retired, a trusted housemate can be helpful and reassuring to have around.

Another way to wring dollars out of your home in retirement is via a reverse mortgage. That's where you borrow against the equity of your home, receiving either a lump sum or specified regular payments. You're allowed to remain in your home, but when you leave -- perhaps due to moving to a long-term care facility or when you die -- the loan will need to be repaid. That typically is handled by selling the home.

A downside is that your heirs generally won't get your home. Read up on this strategy and learn a lot more about its pros and cons before getting a reverse mortgage.

You might also get more money for retirement by downsizing into a smaller home. Doing so will generally give you smaller mortgage or rent payments and should cost you less in property taxes, insurance, maintenance, repairs, and utilities. It might not cramp your style too much, either, if your kids have grown and moved out, leaving you with more space than you need during retirement.

You might also generate more retirement income by moving to a less costly town or part of the country. This could include moving to a smaller home, but it might not. Check out the median home value in some representative cities, along with a recent cost-of-living score there (with a score of 100 representing the national average):

City

Median Home Price

Cost of Living

Portland, Oregon

$419,600

130.8

Longmont, Colorado

$398,000

122.0

Salt Lake City, Utah

$392,000

118.9

Charleston, South Carolina

$316,500

111.5

Nashua, New Hampshire

$289,700

111.1

Atlanta, Georgia

$259,000

107.5

Chicago, Illinois

$229,100

106.9

Tampa, Florida

$219,400

100.1

Richmond, Virginia

$214,400

95.10

Yuma, Arizona

$156,300

88.2

Oklahoma City, Oklahoma

$130,000

85.4

Ocala, Florida

$148,200

83.8

Tulsa, Oklahoma

$118,700

83.2

Hobbs, New Mexico

$140,600

78.5

Source: BestPlaces.net.

There are, of course, lots of other possible locations that can be great places to retire.

Finally, another way to generate more retirement income from your home is to work there doing a side gig. That might be tutoring kids online in a subject you're good at, such as math or French, or running an online store where you sell sweaters you've knitted or wooden jigsaw puzzles you've cut or soaps you've made. There are many other side gigs to consider that can bring in needed income. If you can generate just $200 extra per week, you're looking at more than $10,000 in additional annual income.

Take some time to figure out how much income you'll really need in retirement, and see whether any of the above strategies can help you. Be sure not to ignore healthcare costs, and factor Social Security income into your overall plan, too.

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5 Unexpected Sources of Retirement Income -- All Related to Your Home - Motley Fool

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December 22nd, 2020 at 7:01 pm

Posted in Retirement