It’s stressful knowing that the consistent (and delightful!) monthly deposit into your bank account will end when you retire.
But there are many ways you can increase income before retirement to ease the abrupt end of that sweet reliable employment income.
Stock dividends, covered calls, alternative investments, various real estate investments, and even consulting or online business are all ways to increase income before retirement.
Sound easier said than done? If you’re wondering if it’s really possible to increase income before you retire in a meaningful way, keep reading as I show you how.
After making the transition in late midlife from my husband’s steady employment to “winging it”, we gradually established multiple income streams from stocks, real estate and online business over the past 15 years.
Some things worked while others didn’t. The things that didn’t work were painful. The things that did work have been fulfilling and rewarding.
The inspiration for this post is what we learned on this journey. It’s the steps to take to increase income before retirement. It’s what I wish I had known when we first began.
We’ll start with lifestyle factors like money and time, then move into financial matters like risk and capital so you can sail smoothly into retirement.
Start with a Plan
It can be tempting to put time and money into an alluring income generating strategy only to realize months or years later that it doesn’t provide what you need financially or from a lifestyle standpoint. Not only can you can end up hating the work involved but the income you expected my not be enough.
To avoid this, start by defining what you want in your life, and then use some math. The goal is to live how you want from an enjoyment, time and financial perspective, especially the older we get, right?
Lifestyle Expenses
Most retirement plans are based on cutting expenses in retirement. Don’t take this as a given! You get to choose.
First, decide if this is what you want or if you want to increase income to meet the lifestyle expenses you have before you retire.
You may even decide you want to increase your expenses since you’ll have more time to play! Decide what you want. Then see if the income you’ll have in retirement meets your desired after retirement spending.
If there’s a gap, you can fill it, ideally by getting started well before retirement.
Read my related post What Net Worth Do You Need to Retire?
Living Off Investments Challenge Videos and Guide
Here is my Living Off Investment Challenge video series I did which steps you through this entire process, along with a handout that will make it easy to see if you have a gap between the amount you want to spend in retirement and your future estimated retirement income. Do this and then keep reading.
After you’ve clarified how much money you want in retirement, based on how much you want to spend, and any related gap, think about the easiest solution to fill that gap before retirement.
Employment Income Increases
The most obvious and easiest way to end up with more income in retirement is to boost employment pay somehow before retirement.
While employment income is what will come to an abrupt end when you finally do retire, a key factor in having more income in retirement is the amount of capital you have to generate extra income.
With this solution, you’re still in wealth building mode before you retire. The more savings you have, the more income it will generate you later on in retirement.
If you have another ten or fifteen years before retirement, you can have a meaningful impact on how much money you have in your savings at retirement.
For example, if you saved another $850 a month for ten years, that’s an extra $102,000 before even adding in the compounding of that money.
The income (and subsequent) compounding could be anywhere between 2% from a money market account. Or, based on history, that money could earn a slightly negative return to well over 200% invested in stock market returns during those ten years!
Read more about this in my post How to Calculate Investment Income or How to Manage Risk in the Stock Market.
Regardless of how you invest that “extra” money, another $102,000 can be the capital needed for a down payment for a cash flowing rental property, an online business purchase, or $700 a month in dividend income with a more proactive dividend investing strategy.
And if that money is invested well and it compounds, it could be several hundred thousand dollars more that you have to use toward generating income after you do retire.
So it’s definitely worthwhile to explore whether a lateral or strategic career move can increase your employment income in your remaining years before retirement as a first step.
Read my related post Is Dividend Investing Worth It?
Decide How Much Time You Want to Spend
Time is sort of like money. There never seems to be enough of it so this section has tips to help you spend the needed time to set up extra income before retirement.
It’s what has helped me implement over the years when I felt like I didn’t have the time. Some of the income generating methods we use take almost no time beyond the initial research, while others are more like part time jobs.
The trade off tends to come between time and savings, as you’ll read later. For now, let’s focus on time because if you don’t make the time to create income it won’t happen.
Set a Schedule
Few people feel like they have any “extra” time, so you have to find time to increase income before retirement.
This is doable. For example, over the years I’ve been impressed with the dedicated online startup entrepreneurs I’ve encountered who get up at 5:00 am to work on their business before getting kids to school followed by a full day job!
Sometimes a grueling schedule like this can work. But for others, like me, a schedule like this can be unhealthy and just be too much. Only you know how much time you can healthily allocate to increasing income before retirement.
Having clarified that, it’s important to note that sometimes having time requires a trade off in the form of giving up one thing for another.
Delegate
I have found the best way to find time is to delegate.
You may want to explore if it would make sense to hire a local assistant to run errands and do other tasks that are easy to delegate and don’t contribute to your life on a higher level the way that increasing income would.
Prioritize
On a regular basis, ask yourself if you had rather spend time on increasing income or doing whatever else is calling for your time. It’s often a question of prioritizing.
And based on the income stream process I use, the way you choose to create income streams will be focused around something you enjoy doing making the time trade easier.
Read my related post and watch video How to Increase Net Worth before Retirement.
Schedule Income Generating Time
Write down how many hours you can realistically allocate toward your endeavor to increase income before retirement. Consider large and consistent chunks of time based on your own “prime time”, as one of my former bosses called it.
Maybe you can work from 5 to 7 each morning 6 days a week and 6 hours on Saturday, for example. That’s 18 focused hours a week!
Or maybe you only want to work on this extra income endeavor 4 hours a week on a Saturday afternoon.
The number of hours you want to spend will lead you to the best method to increase income because time is a primary factor in choosing the best income stream to start before retirement.
After you decide how much time you want to spend, and when, schedule that time in your calendar. Time is money’s sister, so let’s go there next.
Decide How Much Capital to Use
Deciding how much capital you have available to increase income before retirement is at least as important as the time you’ll use. It can be a limiting or non-limiting factor.
For example, if all your savings is tied up in some type of retirement account which you cannot or don’t want to access, then you’ll probably need to choose a low capital method to increase income unless you want to partner with someone who provides capital.
Other options are, of course, to downsize and free up capital, or sell some assets.
Read my related post Is Downsizing Right for Me?
If most of your wealth is available to use to increase income, you’ll have many choices.
So deciding how much capital (A.K.A savings) you want to use toward your income endeavor is a starting point as important as time. Watch my video below entitled How to Increase Income before Retirement.
Choose Your Risk
When considering the amount of capital to use for increasing income, consider risk very carefully, especially since you’re nearing retirement.
The amount of risk associated with increasing income before retirement will vary greatly depending on the income method you choose as I’ll address next.
Read my related post Risks of Income Investing.
Risk and Required Capital
Risk is intertwined with the amount of capital you’ll need to use for your income method. There are many different ways to increase income before retirement, all with varying levels of risk.
Thinking both inside and outside the box, here are a few examples to illustrate this point. Some income generating assets, such as many types of bonds, for example, have a low risk of decreasing in value but they require tons of capital for the income you get.
Other methods, such as selling naked options, have very high risk but require little capital. On the other hand, selling covered calls on stocks you already own can generate good income while actually lowering risk a little, contrary to what most believe.
Read my related post Are Covered Calls a Good Strategy?
Contrary to what most people think and how it feels, starting a local small business is very risky. First, buying or starting a local brick and mortar business requires a lot of capital. Plus, small business ownership is inherently risky.
Buying a local business was the first area we explored extensively when looking to increase income before retirement but the risk was too high.
On the other hand, buying a small online business requires much less capital but it can also be risky unless you know how to run an online business.
Read my related post Investing in Startups for Individuals.
These are just a few examples from among the many methods to generate income before retiring. You can see they all have different risk levels.
The lowest risk way to increase income before retirement that I see now is from creating an online business given the zero capital required.
Like many methods to increase income, it has a steep learning curve, and it requires time to learn and establish income but the upside is big and the capital is nil.
By identifying the risk exposure you want, you can narrow down the best ways to increase income before retirement based on how much risk you want to take.
Here’s my video entitled How to Buy Assets That Generate Income where I explain more about this.
Think Outside the Box
When we first started looking at ways to increase income outside of employment income, we limited our thinking to stock dividends and bond interest, and then buying a local business.
We had dabbled in real estate a little over the years but finding cash flow properties in Austin was not easy at the time, unlike a few years later after the financial crisis. We did, however, manage to find a fourplex which we still own.
Gradually, we tiptoed into more alternative ways to increase income, and I encourage you to do the same. We tried partnering with others in some real estate and small business ventures, and that didn’t work.
This was painful, especially given the financial crisis at the time. We learned an important lesson: We do best from buckling down and learning what we need to learn and forging ahead.
So we brainstormed what to try next based on our skills, goals, time, and income gap as covered above. Larry had been a professional trader in his long career, so he began selling options.
I liked selling covered calls since they were simple and we owned stocks anyway.
We had our real estate rental income, and income from stocks and bonds so at this point we had several income streams but there was one more we just had to try out.
Online Business
In our hearts, we were at a time in our lives when it appealed to us to share what we had learned over the decades with other people who wanted to learn from our experiences.
We still wanted to grow and be fulfilled. The best way to do this was with online business given the low capital required. At the time, all the tools to build your own website and run an online business weren’t available like they are now, so it wasn’t easy getting started.
But it was a good fit for our more passive income streams since it allowed us to build assets and diversify with little money.
Read my related post Businesses to Start Later in Life – 115 Cool Ideas and Is It Too Late to Start an Online Business?
Getting Started Online
I’d been investing since right after college and investing was a passion, so this led me to start a financial education website for women just to learn how it all worked.
After a couple of years, we started a website where Larry taught other financial professionals and individuals how to trade options with low risk strategies, which were in high demand after the financial crisis.
This business grew quickly given Larry’s expertise and market demand. It has demanded more of our time ever since. Not only did it completely fill our projected retirement income gap, the work is fun and fulfilling. In fact, testimonials pour in often making it all the more worthwhile.
We love and recommend the online business model for those who are at all interested for so many reasons. I share all of this so you can see that it’s not easy to think outside the box, especially if you’re older like us. But doing so led us to starting our online businesses.
And this endeavor, unexpectedly, ended up creating multiple income streams for many years. But this may not be for you. You may love real estate rentals. Or you may love the idea of selling covered calls after researching stocks. Or you may like to consult for small businesses locally.
Any of this can be done with the necessary time and commitment. And it can all dramatically increase income before retirement so you can ease into retirement without the stressful loss of steady and significant income and having to do without things you really want in your life.
I know because we did it and you can, too.
Read my related post How to Choose an Online Business to Start and Starting an Online Business After 50.
Do What You Want
When faced with a choice, I ask myself what I want to do more and more as I get older. Life is too short to spend your time doing something you hate.
What do you want to do to increase income before retirement? This factor is as important as the other factors covered here because doing what you want to do will increase your success probability as well as your life enjoyment.
Skills
By the time you’re close to retirement, you’re good at some things and you know what they are. If you’re great with analysis, picking dividend stocks could be the best method for you to increase income.
Maybe you even want to sell covered calls on them to increase income without increasing risk. Both of these income methods are easy to implement while you’re still wording full time.
Or maybe you like to fix things around your home. In which case real estate rentals may be the best fit for you to generate extra income. Real estate rentals are easy to buy and manage before retirement.
If you like business strategy and love to learn, starting an online business may make sense for you although it does take more time.
Apply what you’re already good at with the other factors here to hit the ground running. All of these methods can increase income before retirement and also fill your income gap in the decades after retirement.
Read my related post Start a Business or Invest in Stocks? and Owning a Business Vs Real Estate.
Summary
As you can see, increasing income before retirement can be done in many different ways. Grab your journal now and brainstorm the factors above to see what makes the most sense for you to increase income in the most enjoyable way.
The best place to start is with my Ultimate Wealth Plan. You can get it here now.
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