If you want a smooth retirement, it’s not enough to simply tuck away part of your paycheck during your working years and worry about the rest later.
You need to make sure the money will keep flowing when you actually need it, and make plans to weather an unpredictable future.
The sooner you look at your options, the more bumps you can avoid on your retirement ride. Here are six ways you can plan ahead to ensure you have a reliable income in retirement.
1. Create a Social Security claiming strategy
Social Security is often the first thing people think of when it comes to retirement income. After all, it’s a steady income we receive, after paying into the system through our working years via a payroll tax, that grows with inflation without our needing to take risks. And it’s largely automatic.
But you still must have a claiming strategy in place long before you need it to maximize your lifetime benefits.
While you can begin claiming Social Security as early as age 62, you’ll have a permanently reduced benefit if you do. If you wait until 70, on the other hand, you’ll get the maximum monthly payout for which you are eligible.
That doesn’t necessarily mean you should wait until you’re 70 — there are times when doing so doesn’t make sense. So, look at the numbers and find out what will work for you, far in advance. You can get professional help figuring this out.
2. Find a job with a pension — if you can
Although 401(k) plans are one of the most popular retirement saving vehicles today, they only really burst onto the scene in the early 1980s. Before that, millions of American workers had a very different retirement benefit: a pension.
With pensions, you build up the benefit over your working life and then receive a guaranteed monthly check in retirement.
Pensions are much rarer these days, with only about one-quarter of employees saying they still get them. But if you have the time (you may have to work a minimum number of years to be eligible) and opportunity to take a job that offers one, it could still be worth pursuing.
Government jobs and companies with strong unions are the first place to look, but some big-name companies still offer pensions too.
3. Consider a reverse mortgage
This is still a mortgage — on your house — but the money is flowing in the other direction, to you. In effect, you are borrowing money and using your home as security.
Reverse mortgages can be structured in different ways, including as monthly payments, a lump sum or a line of credit. You don’t have to repay the loan until you leave the home. And if you die before then, the house will be sold to pay it off.
They’re not right for everyone, but a reverse mortgage might provide a steady source of income if you have a lot of home equity and don’t plan to leave the house to family. You have to be at least age 62 to take a reverse mortgage.