Hidden Sources of Retirement Income

Many retired men and women report that their biggest concern in life is simply running out of money.   But additional sources of income are sometimes available to retirees.

• Unneeded life insurance can often be converted into a paid-up lifetime annuity. Or you can cash the policy and reinvest the proceeds to provide more retirement income
• Your house can create additional revenue.  If you move to a retirement community you can sell your principal residence and take advantage of the $250,000 exclusion ($500,000 for married taxpayers) on capital gains taxes (you must have owned and occupied the house for two of the five years prior to sale). If the exclusions won’t cover your capital gains taxes, consider transferring the house to a charitable remainder trust and reserving lifetime payments of at least 5%.  You’ll avoid all taxes and receive a charitable deduction, as well.
• Working part-time is sometimes an option.  Post-retirement employment won’t reduce your Social Security benefits if you are age 66 or older; some reductions occur from ages 62 through 66.
• Many retirees own U.S. savings bonds that can be cashed and converted into an income stream.  With most bonds, this means paying tax on accumulated interest, but there is a satisfying alternative:  A charitable gift annuity.  You must report any interest that has built up on the bonds, but your gift annuity will create a charitable deduction that may reduce or even eliminate the taxes.  Furthermore, you will receive lifetime payments at attractive payout rates, part of which will be tax free during your life expectancy.  What’s more, the gift annuity is “an income you cannot outlive.”