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Top 5 Ways to Increase Cash Flow for Retirement

Just because you don’t get a paycheck doesn’t mean you can’t get paid in retirement. The following are the top five ways to increase cash flow during the golden years.

5. Redefining your lifestyle

Increasing your cash flow in retirement can be done both directly and indirectly. Redefining your lifestyle is a great way to indirectly cut costs and comfortably cover your expenses. Two simple ways to redefine your lifestyle are to downsize and practice good health. Many individuals who downsize in retirement choose to do so by relocating to a smaller, more affordable home. However, there are more than just one way to downsize such as replacing the family SUV with a more fuel efficient vehicle.

Keeping up with your physical health is another simple way to cut cost and increase your cash flow. When you’re healthy, it is easier to prevent and/or manage common medical concerns like diabetes or cardiovascular issues. The less of an issue your health is, the less of an issue medical expenses will be.

4.   Knowing when to Retire

Getting towards the end of a long career can make you desire retirement more and more each day. However, delaying your golden years can be extremely effective in the long run. Postponing retirement is both a cost cutting and savings technique in that you can utilize the medical programs offered by your company and get more time to grow your nest egg at the same time. 

In addition, if possible, put off your collection of social security until your mid to late sixties. Social security is available at age 62; however immediate collection of social security can reduce its benefits up to 30%. Putting off social security longer can potentially double what you’d collect when it first becomes available.

3. Settling your Debts and Identifying your Number

When it comes to retirement, no amount of financial assistance from government entities can fill the void where your paycheck used to be. Needless to say, settling your debts prior to leaving the work place is vital to a comfortable retirement. Having financial outlays and no paycheck essentially leaves you with no choice but to pull savings from your retirement portfolio that you probably wouldn't have had to if debt wasn’t a concern.

Settling your debts allows you to analyze your cash flow far more effectively. Once you’ve analyzed your cash flow and have a basic idea of the cost of your monthly expenses, you can make discerning judgements on where you should put your money and why. 

2. Identifying and Minimizing Risk Factors

The age of retirement, like all parts of life, inevitably comes with a certain degree of risk. One of the most prominent risks in retirement is inflation. Retirement may be a period towards the end of one’s life; however that does not necessarily make it a short amount of time.  

You retirement is a matter of decades, not years. With this in mind, failing to address the risk of inflation when leaving the work place can have drastic effects because in the long run everything gradually gets more expensive as the years pass by. But while inflation is inevitable, it can be used to your advantage to increase cash flow. For example, if you own real estate that you rent out to others, you can increase the monthly rent payment as the cost of living rises.

1. Reverse Mortgages

Obtaining a reverse mortgage is a great way to stimulate all four of the top five ways to increase cash flow in retirement. A reverse mortgage, by its very definition, puts money into your pocket that is extremely mobile. The benefits and funds that homeowners can enjoy from a reverse mortgage are vast. They offer the reliability of remaining in your home and the advantage of being able to pay off existing debts. The frailty of our current economy has left the housing market extremely unpredictable. Home values are changing daily, savings portfolios are thinning, and cash flow is a major area of concern for many retirees.

This leaves the question, when and why should I take out a reverse mortgage? The time to take out a reverse mortgage is when your monthly cash flow isn’t something that you’re comfortable with. There are many reasons to take out a reverse mortgage when the benefits of pension, savings, social security, etc aren’t what you thought they’d be when you were still working. However, one reason sums them all up: reverse mortgages are safe; safe for you, your spouse, and your heirs. Yes, all proceeds from a reverse mortgage must be paid back. However, repayment of the loan is contingent upon sale, relocation, or death.

A reverse mortgage can increase cash flow in more ways than just paying out cash from your home equity. Say you take out a reverse mortgage and then four years later you decide to sell your home. If the proceeds of the sale exceed the loan balance, you keep the profit. And if the sale doesn’t cover the outstanding balance? Don’t worry about it. The Federal Housing Administration (FHA) insurance fund covers the difference, not you or your heirs.

Reaching the age of retirement should be a time for enjoying life not working for it. But let’s face it, retirement isn’t all golfing and playing with the grandkids. Sometimes cash flow isn’t what you thought it would be and you find yourself facing a stack of bills without a stack of cash to match them. However, when you’re in a financial jam during retirement, odds are the solution is something simple.

Redefine your lifestyle, know the right time to retire, practice simple debt management, and protect yourself. Reverse mortgages can help with all of these things for you by putting the money you need into your pocket.