The old model of retirement no longer works for a lot of people who want to live well in retirement.
Old retirement strategies include basics like delaying social security, working longer and part time employment. But, fortunately, there are now some more innovative and lucrative retirement strategies that can be a real godsend for retirees.
Many millennials are already using some of these new retirement strategies as part of the FIRE movement or to make extra income outside of employment so they can retire earlier than previous generations.
But those over 50 are slower to embrace these new retirement strategies that may actually allow them to retire sooner with more money than they thought.
In this post I’ll address why we need new retirement strategies and share my favorites.
I write from a place of having implemented multiple alternative retirement strategies since my husband “stumbled” into early retirement after a long career overseas in our 40’s. So, we’ve been at this a while.
While I’m an Accredited Financial Advisor®, this information is based on my own experiences.
Why We Need New Retirement Strategies
Finances and society has changed but the old ways of retirement are still deeply embedded in our culture, especially with people over 50. Old ways die hard, as the saying goes.
And while the old retirement strategies work for the very wealthy or the very frugal, they don’t work for the majority of people who haven’t saved enough money especially given low interest rates and longer life spans.
Longer Life Expectancy
My great uncle Blake was like a grandfather to me since my grandfathers died before I was born so I’ll use him as an example of the old retirement plan.
Uncle Blake worked for an oil company and retired at 65. He and Aunt Bea (her real name!) saved their entire lives for this event.
But more importantly, Uncle Blake had a pension, as he liked to explain, while the bitter sweet aroma of his pipe smoke filled the room.
Uncle Blake died in his 70’s, and Aunt Bea died a few years later.
This was the norm. And like many people over 50, this retirement strategy was implanted in my brain early by my ancestors, as well as daily now from mainstream finance and media.
People died earlier so their retirement only needed to last a decade or so.
Higher Standards of Living
We want more now and that’s all good.
Back then, a big event was for Aunt Bea and Uncle Blake to drive to Tupelo to visit us for Christmas. Now, a regular event is to fly to New York to see a Broadway play, take a cruise at least to the Caribbean, or spend a month touring the country in an upscale RV.
As a society, we want more. This is because we know it’s there, our neighbors are doing it, and we want to do it, too.
And we can, but not if we stick with the old retirement model of living on less by cutting our needed income in retirement by 25%.
And why should we, unless we really want to do so, when we can use new retirement strategies that now exist to increase income and enjoy life more?
New Retirement Strategies
It takes a mindset shift to move from following mainstream thinking about how you’ll live in retirement for the reasons mentioned. And some people, like us, are forced out of necessity to shift our thinking about how we’ll fund retirement.
There are several new retirement strategies that we’ve implemented. I’ll cover those here, along with a couple that we haven’t done but that look very solid (We have these as Plan B since our plates are already full given our existing strategies and income streams).
Extra Income Vs Retirement Withdrawals
The old retirement model is to withdraw money from your retirement account to live as I have written more about here. Does the Withdrawal Plan still work?
Let’s do some basic math to solidify how effective new retirement strategies can be when compared to the old retirement method.
Say you make only $2,000 a month in extra income from some type of new retirement strategy outside of your investments. And let’s compare that income to a 4% retirement withdrawal method based on the traditional but still popular retirement plan.
$2,000 x 12 Months = $24,000
$24,000/.04 = $ 600,000
This means that making $2,000 a month in extra income roughly equates to having an additional $600,000 in retirement savings!!
Sure, there may be taxes to be paid on the income, but if it is small business or real estate income, there are tax benefits that would offset the taxes owed on the income.
Plus, the $600,000 can stay in your retirement account and grow passively while you use the $2,000 of income from some sort of new retirement strategy!!
Now that I’ve shown you how using some type of new retirement strategy can completely change your ability to live comfortably in retirement, let me get into the strategies themselves.
Reinventing yourself is the new buzz word, especially for those over 50. We did this before it became popular out of both necessity and curiosity to see if it worked and fortunately it did.
You can do it, too, should you choose, by reinventing yourself away from often unfulfilling or exhausting long careers.
This can be done by switching to a whole new industry, like going from attorney to consultant.
Or it can be done by going from employee to small business owner in the same industry.
Trader Turned Online Business Owner
This is what my husband, Larry, did, for example. He was employed as a professional trader for decades, then we began an online business 10 years ago where Larry teaches investors how to use options at PowerCycleTrading.com.
There was a transition from employee to online small business owner while he was a consultant for financial firms. In hindsight, it was a smooth journey, but we didn’t know it would be smooth, so we understand the stress of uncertainty about doing something unconventional like this.
Engineer Turned Handyman
Reinventing yourself can take many forms. For example, I have used several handymen who have gone from being engineers to home maintenance. And one was a financial executive.
One handyman in my area charges over $100 an hour and he is always booked!
Executive to Dog Trainer
My dog trainer, Bill, left the executive world in his late 40’s to fulfill a lifelong dream to work with dogs. He was very expensive at $185 an hour, but he is the only trainer that got Blanco to stop a dangerous habit in only one session!
Let’s do some math on that:
Working 25 billable hours a week, Bill would gross over $231,000 a year doing what he enjoys on his own schedule!
And Bill was fully booked, by the way. He had an assistant handle all his appointments and payments, using his executive skills to run a smooth and profitable small business.
This list is endless and can be tailored to your skills and passions. You can be a style consultant, a career coach, a business consultant or a personal chef!
You can see how this new retirement strategy is a game changer.
Speaking from experience, it changed our lives in so many positive ways and kept us from having to relocate to expensive New York or Chicago away from family in my 40’s.
For more inspiration, you can read my article 115 cool ideas.
If you’re thinking to yourself that this sounds like a lot of work, there are plenty of more passive new retirement strategies as covered next.
Become a Covered Call Writer
This little known retirement income strategy is a step beyond investing in stocks. If you like to invest in individual stocks, you can learn how to sell covered calls on them.
Even if you use a financial advisor or wealth manager who has bought stocks for you, you can sell out of the money covered calls on most higher volume stocks. And this can also be done inside an IRA.
How Covered Calls Work
With covered call writing, you simply sell a call option against a stock you already own. You’re probably thinking “but aren’t options risky?”
Yes, options are risky if you don’t understand them! But with a covered call strategy, there is no more risk than owning a stock outright.
In fact, there is a little less risk since the income from selling the call options reduces the cost of owning the stock, thereby reducing the capital you have at risk.
Since most retirees are subject to stock market risk anyway, adding this extra income stream to stock ownership generates extra income.
You can read my article How Do Covered Calls Work here.
Real Estate Rentals
Real estate income is a popular alternative retirement strategy again after a lot of investors got burned in the real estate related financial crisis.
The great thing about owning real estate rentals is that when either you buy properties a low valuations or you catch the real estate cycle right, you can build wealth in addition to creating income streams.
Short Term Real Estate Rentals
Renting a part of your home through AirBnb can be an excellent way to generate income in retirement. This is not something we have done personally, but a family member is using this strategy to pay most if not all of her mortgage consistently every month. It works.
Creating an online business has been our favorite early retirement strategy. This strategy can overlap with reinventing yourself.
For example, I love writing and investing so here I am creating a content based website about investing. I also love branding and business, so I created my own brand to manufacture and sell my branded products on Amazon and one of my other websites.
The best thing about creating an online business is that it can be done without risk since there is no capital required.
Buying Online Businesses
Creating an online business, especially a content based business, can take over a year to make money. But buying online businesses are becoming more mainstream every day.
Not only this, but the old retirement plan invests in stocks that are trading at earnings multiples of about 18 on average (based on the S&P 500) as of this writing.
Online businesses, on the other hand, often sell for multiples of 3 or even less! That’s a huge difference; you’re paying about 6 times as much for company profits with common stocks vs online businesses!
Remember, however, that small business is risky, period. And online small business can be even riskier. But this can be a smart retirement strategy for someone who is already familiar with online business or wants to partner with someone who is.
An alternative to managing an online business yourself is to outsource the management of a purchased online business. This can be done easily nowadays. But as always, more risky investments like this warrant only a small percentage of your assets.
While I have not bought an online business, I am looking at online businesses for sale now.
Summary for New Retirement Strategies
These are my favorite new retirement strategies based on our experiences.
Implementing any of these strategies increases your skill set which keeps you marketable as you age, reducing the risk of running out of money in retirement even more. There are also personal development opportunities in implementing any of these new retirement strategies.
Adding one or more new retirement strategies to the more traditional retirement strategies can completely change your ability to retire sooner and more comfortably.
If you’re interested, get my newsletter and grab my free eBook on wealth building strategies that generate income streams in retirement, too.
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Disclaimer: Nothing in this post is meant to be taken as personal financial advice. Only you are responsible for your own money.