Making the transition from working to becoming a pensioner can be difficult. You might find all the extra free time overwhelming and not know what to do with it, and you may also miss the routine of going to work every day.
However, perhaps the biggest challenge you’ll face with your new way of life is learning to adapt to the loss of income. Having been used to relying on a regular wage for so many years, the sudden change in monthly income coupled with your usual bills and expenses can be alarming. Fortunately, there are many sources of retirement income that you can take advantage of.
We’ve provided some advice to help you put your money to work so that you can enjoy your retirement to the fullest.
Check benefits
A good place to start will always be to find out what you are entitled to in terms of Social Security. It should be a part of your retirement plan anyway, but if you have not given much thought to it so far, it is something that you should definitely consider. Make sure that you find out what you are entitled to in terms of Social Security.
The payments you receive will be determined by your 35 highest years of earnings. It is not determined by the tax that you pay or held in some pot for you to claim when you reach the age of retirement. Instead, the money from the tax that you have paid will go to a trust that is paying existing claimants right now.
You can apply for Social Security from the age of 62, though you might decide to keep working for a while instead of retiring. It is up to you – you might not want to apply for it until you reach the age of retirement! You also do need to remember that this is an application that needs to be filled out and not an automatic allocation. Applying for Social Security is one step that you need to take when preparing to make the transition to being a pensioner, so don’t forget about it. Depending on your circumstances, it could prove to be an important part of your income!
Retirement account
If you haven’t already, then consider getting – or switching to – a retirement account. It’s surprisingly easy to switch your bank account, and many banks offer cash incentives to encourage you to switch to using their services. Check carefully to see if there are any incentives that could benefit you if you decide to switch from your current bank to another.
There are a number of retirement account types, but Roth Individual Retirement Accounts (IRAs) are one of the best investment options. A Roth IRA allows you to invest cash that you’ve earned through paying taxes, and any money you earn is not tax-deductible. This should be something you look into as soon as possible in your working life, even if you are many years away from retirement.
Annuities
Buying an annuity is an effective strategy to turn a lump sum of money into a regular source of retirement income. Put simply, an annuity is a contract with an insurance firm, where you pay the company a sum of cash and, in return, they send you a guaranteed monthly income for the rest of your life. Regardless of how long you live for, the company will continue to credit you each month. As the income is regular, it can ease the transition into retirement after you’ve been so used to relying on a regular work salary. It’s also unaffected by interest rates and stock prices.
However, annuities are complicated and often carry high fees, so it’s crucial that you do your research on them before you rush out and buy one. Furthermore, you don’t know how long you’ll live for, so you could be losing a lot of money – if you pass away before receiving the full amount you invested, the firm will retain the remaining balance in your account.
Earn an income
Just because you’re retired doesn’t mean you have to give up working, if that’s what you wish. You might find that you’re restless during the day, or perhaps you just really enjoy your job – either way, there’s nothing stopping you from continuing to earn a wage. Many pensioners continue to work, often part-time, often because they want to prevent boredom in their retirement.
Understandably, that’s not for everyone; but fortunately, there are many ways you can earn a passive income as a pensioner. Renting out your spare room, letting out a parking space, earning money from writing a blog, or selling unwanted possessions online are just some examples of potential sources of retirement income.
Also, why not consider putting that hobby to use and see if you can earn a few extra pounds from that? For instance, if you’re an avid painter, perhaps consider selling your work. Likewise, if you enjoy playing a musical instrument, you could earn some pocket money from tutoring students.
Adapting to retirement after being so used to a regular monthly wage can be challenging. Thankfully, there are sources of income that you can benefit from to help you make the most of your money in your retirement years.
