5 unexpected sources of retirement income

When you’re young and need more income, you can take an extra job, get a raise, or move on to a better-paying job. But when you’re retired, those options may not be feasible. Still, retirees need enough income to survive for perhaps two or three decades (or more), and Social Security alone will never provide them with as much as they need.

Here are five sources of income to consider for your retirement. See which ones make sense to you, and maybe save one or two in your mind for later.

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1. Your health savings account

If you have a high-deductible health insurance plan, you may be able to set up a Health Savings Account (HSA), which can help pay for eligible medical expenses on a pre-tax basis. It’s great and will save you money, but there’s even more to love about HSAs.

A key feature of the HSA is that unlike its cousin, the Flexible Spending Account (FSA), the money invested in it is not there on a use-or-lose basis. Anything not spent on these qualifying expenses stays and grows. Even better, it can also be invested in stocks.

But wait, there’s more! Once you hit 65, you can spend that money on anything. Any unspent monies for eligible healthcare expenses will be considered taxable income to you, just like withdrawals from an IRA or traditional 401(k) account. Thus, an HSA account can serve as a good retirement savings account. Since retirees often face hefty health care expenses, you might end up spending a large chunk of the account on them anyway, saving on taxes.

2. Dividends

You may not think of dividends as a windfall source of retirement income, but chances are you don’t take them seriously enough. You might be expecting a few hundred bucks here and there, at most. That’s not how it should be.

If you have a portfolio with a bunch of healthy, growing stocks paying dividends, you might be able to set yourself up for an income stream that rivals Social Security. For example, with a $500,000 portfolio that has an overall dividend yield of 4%, you can expect to receive $20,000 per year in dividends alone. Even better, the income will arrive without you having to sell stocks. You can hold the shares and ideally they will go up in value. Large dividend payers also tend to increase their payouts over time.

For perspective, the average Social Security retirement benefit recently was $1,661 a month, or about $20,000 a year.

A happy person smiles at a laptop with his arms raised.

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3. Interest

Interest can be another powerful source of retirement income, but not right now because interest rates have been extremely low for many years. But inflation rose and the Federal Reserve signaled increases were on the way. If you have $100,000 in short-term investments and you’re earning 1% interest on those investments these days, that’s $1,000 in interest income. It’s better than nothing, but it won’t go far in retirement.

Remember, however, that interest rates fluctuate over time. Check out some historical prime rates in the table below:


Preferential rate

August 1, 1948


January 22, 1958


December 18, 1968


December 3, 1973


December 26, 1978


April 2, 1980


December 19, 1980


November 28, 1988


July 2, 1992


May 17, 2000


June 27, 2003


December 13, 2005


October 29, 2008


March 15, 2020


Source: Fedprimerate.com.

There are occasional periods when interest rates can be well into the double digits. If your $100,000 portfolio is earning 8% interest, that’s $8,000 in annual income for you, or about $667 per month. This type of income can go a long way toward paying for food, utilities, or travel in retirement. Depending on how interest rates rise in future years, interest could be an unexpected source of retirement income.

4. Parallel work

I’ve noticed that in retirement, you might not be up to a regular side job, like being a cashier in a store. But the are certain types of side jobs that you may be able to undertake, at least for a few years, that can bring significant income to your household.

For example, you may be able to give language or music lessons to children or adults. If you charge $50 for a lesson and give six lessons a week, that’s $300 in extra income for the week, or about $15,000 a year. You might make things to sell, like sweaters or furniture, or you might take up freelance work that you do on your computer, like writing, editing, or designing.

5. Your house

Your home can provide another unexpected source of income if you rent out space there through services such as Airbnb Where Expedia VRBO service. If you are spending a week or several weeks visiting friends or family, your home may be available to rent for several long periods. Depending on the accommodations you can offer and the location of your home, you might be able to earn around $100-200 per night or more, so renting your space for 14 nights per year could generate $1,400-2,800 dollars per year.

Depending on your situation, you might even be hosting a boarder for a while. If you charge $600 per month for one-bedroom and kitchen privileges, you could generate $7,200 per year (before taxes).

Another way to extort money from your home is with a reverse mortgage. It won’t work for everyone, and it doesn’t make sense for everyone either. However, it is an attractive solution for some retirees when they need more income. It involves borrowing money using your home as collateral and receiving regular payments based on its value. The loan does not have to be repaid until you no longer live in the home, such as when you die or move into a retirement home or care facility. There are several pros and cons to consider, so read up on reverse mortgages if you’re interested.

A little research online can reveal other sources of income, but one or more of these five ideas might just come in handy in the future.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a high-end advice service Motley Fool. We are heterogeneous! Challenging an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and wealthier.

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