5 Retirement Income Strategies to Generate More Money

Mar 16, 2021 | Finances in Retirement

5 Retirement Income Strategies

Retirement can be a financially tricky time for many people. After a lifetime of work and, in many cases, consistent raises as you progress through your career, the shift to a fixed income is a challenge — especially if that fixed income is less than what you’d been making while still at your job.

And, while retirement savings, pensions, Social Security, and other forms of savings can all be helpful, retirees may still have concerns about covering all the costs they encounter. In this post, we’ll explain 5 of the most common retirement income strategies that retirees can gain more income and live a more comfortable retirement. 

Key takeaways

  • For many retirees, managing costs with a fixed, lower income can be challenging. 
  • Some common retirement income strategies include:
    • Retirement accounts, like 401ks and IRAs
    • Pensions and Social Security disbursements
    • Part-time work or an encore career
    • Budgeting and downsizing by purchasing a smaller home
    • Tapping into home equity with a reverse mortgage 
  • Each funding method has its benefits and drawbacks, and many retirees use a mix of a few methods when creating a retirement income strategy that works for them. 

We’ll start with the most common way that you may be able to form income strategies for your retirement. 

Systematic withdrawals from your accounts

Many retirees have been saving up in a retirement account of one kind or another throughout their working days. For example, many workplaces offer a 401k as part of their compensation package — this is an employer-subsidized retirement account that employees can deposit money into from each paycheck. 

Even if your employer does not offer a 401k, you can still benefit from a retirement savings by opening an IRA, or independent retirement account. These accounts are also tax-deferred like 401ks, allowing you to grow your savings slowly over time. 


While withdrawing from a retirement account before retirement often incurs steep penalties, like a 10%- 20% tax, once you retire, you become eligible to start receiving disbursements. If you do rely on your retirement savings for a source of income in retirement, it’s important to manage it carefully. Interest may continue to accrue on your balance, but apart from that, you will be living on a fixed income

And, in addition to your retirement savings slowly depleting over the course of your retirement, the amount you’re able to withdraw each month will likely be less than the amount you were earning each month while working your job. That makes having a solid retirement budget essential (we’ll discuss budgeting more a little later on). 

You can talk with a professional financial planner — or try to do the math yourself — to make sure you’re withdrawing a sustainable amount from your accounts each month. However, even with clever budgeting and consistent, systematic withdrawals, you may be concerned that you will not have enough. Let’s consider some of the other income strategies for your retirement. 

Pensions & Social Security

Two more ways that retirees may be able to secure consistent income are through pensions and Social Security. Here’s how each of those two income vehicles works:

  • Pensions are a type of plan, similar to retirement savings, set up by an employer. However, unlike retirement savings — which is technically a kind of investment account, subject to market volatility — pensions are guaranteed by employers. So, employers take on the risk when offering a pension. Likely because of that, this sort of plan is less and less common. However, many government employees and some unionized workers may still have access to pensions. With many pensions, the longer you’ve been working at your company, the longer you will be able to receive after retirement.
  • Social Security is a form of income guaranteed by the federal government. The Social Security Administration collects taxes from workers during their careers. Then, when they retire, they are eligible to begin receiving disbursements. These disbursements can range from just a few dozen dollars a month up to a maximum of $3,148. Similar to a pension, the amount you get just depends on how long you’ve been paying into the system — the longer you wait to retire, the more you stand to gain. 

As with private retirement accounts (the 401ks and IRAs discussed before), pensions and Social Security disbursements are fixed and likely less than the amount you earned while working — though this can vary significantly by industry and personal situation. 

This means that many retirees still look for other ways to supplement sources of fixed income after they leave the workforce. In fact, many don’t fully leave the workforce at all. 

Encore career or part-time work

Did you know that as many as 20% of Americans either work or search for work during retirement? This is up from 10% in the ‘80s, as AARP reports. There are many causes of this, such as higher cost of living, cuts to Social Security over the past 30 years, and lower wages making it harder for many to save for retirement. 

While there are systematic problems with the way that the US handles retirement, it’s important to know what options are available if you do find that you need to look for part-time work in retirement. Some options that many retirees may be interested in include:

  • Part-time consulting in the career field that you retired from, offering advice to newer businesses in the market
  • Mentoring services, providing counsel for new entrepreneurs and professionals working in your field
  • Gig economy jobs, such as driving for Uber or Lyft, or making deliveries through a restaurant delivery app like DoorDash
  • Part-time work at a cafe, restaurant, library, or store
  • Childcare, such as babysitting, nannying, or even running a small daycare
  • Selling homemade crafts and goods through a site like Etsy

Another benefit of having a job in retirement is that it adds purpose to your life. Many retirees can feel that life without work is monotonous and difficult. Having a job can break up the day and add a sense of meaning, especially if the job is something you’re passionate about. 

Budgeting & downsizing

While this technically is not a retirement income strategy on its own, it’s a way to expand the power of your income. Budgeting, as mentioned before, is important for retirees who are operating off a fixed income that is likely lower than their previous late-career income. 

When setting up a budget, you can start by allocating funds toward the highest-value necessities. Often, these include food, utilities, and your living expenses. In fact, most retirees spend about a third of their income on their living situation alone. 

While budgeting can help you stretch your money further than you may have thought, you may still encounter situations where the amount you have is simply not enough to cover the costs that you face. In that case, one solution that many retirees turn to is downsizing. 

Downsizing usually refers to opting for a smaller, more inexpensive home. For example, you might currently live in a larger, three-bedroom house that you had while raising a family. However, now that the kids are grown and moved out, it may be wise to sell that house at a profit, then use a portion of the earnings to fund the purchase of a smaller home or even a condominium. 

Then, the leftover cash from the sale can be put toward your retirement savings. While this may be a workable solution for some, others may prefer to stay at home during retirement. That’s where our last option can come in handy. 

Reverse mortgage loan

For retirees that wish to stay in place during their retirement, a reverse mortgage can be a great option. Reverse mortgages are a type of loan; they allow you to access the equity in your home and use it to receive monthly cash payments, a lump sum of cash, or a line of credit. These funds can then be used to cover various retirement expenses — everything from utilities and groceries to traveling and hobby supplies. 

In order to qualify for a reverse mortgage, the principal borrower must be over 62 years old (recent rule changes allow spouses to be younger than 62, luckily), you must own substantial equity in the home, and you must live in the property as your primary residence. You can read more about reverse mortgages on our comprehensive HECM guide page

Even if you do choose to use one of the retirement income strategies listed here as your primary retirement funding vehicle, a reverse mortgage can still be helpful as a supplementary source of cash flow. After all, having multiple options is a great way to mitigate retirement income risks and strategies that could fall short. If you’re curious and would like to learn more, feel free to contact a Reverse Mortgage Specialist, who will be happy to walk you through your options and explain how a reverse mortgage might be beneficial for your situation.  

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