How to Make Money During Retirement

Retirement is a significant life transition, with many individuals seeking to maintain or enhance their financial standing. The traditional reliance on pensions or accumulated savings is shifting, as more retirees explore generating additional income. This proactive approach helps supplement existing funds, sustain a desired lifestyle, and pursue new interests with financial confidence. This article explores various methods for retirees to generate income, from active work to optimized benefit claiming strategies.

Work-Based Income Generation

Many retirees continue to work for financial gain, social engagement, and mental stimulation. Part-time employment offers flexibility, allowing individuals to control hours and workload while earning income. Opportunities exist in sectors like retail, customer service, and administrative support, often with roles suitable for reduced hours. These positions provide a structured environment and regular earnings without full-time career demands.

Leveraging extensive professional experience is another effective income strategy. Consulting and freelancing allow retirees to offer specialized knowledge and skills on a project basis. This can involve returning to a former field as an independent consultant or offering services like writing, editing, graphic design, or IT support. Older workers can maintain professional relevance and intellectual engagement while setting their own terms.

Entrepreneurial ventures, such as starting a small business or side hustle, also provide a fulfilling path to income. This might involve transforming a hobby into a profitable enterprise, like crafting handmade goods, or offering specialized services such as tutoring, pet sitting, or personal organizing. Such endeavors allow complete control over the business model and schedule, catering to individual preferences.

The gig economy offers modern platforms for flexible work arrangements appealing to many older adults. Services like ride-sharing, food delivery, or online task platforms provide opportunities to earn income on demand, fitting around personal commitments. Approximately 27% of older workers engage in gig or freelance work, demonstrating its growing acceptance as a viable income source. Gig work often serves as a supplement to other income streams.

Beyond traditional employment, many non-traditional skills and hobbies can be monetized. Teaching music lessons, providing gardening services, or offering photography can turn passions into income. When engaging in self-employment or gig work, understand associated tax obligations, such as self-employment taxes and the need to file Schedule C with the Internal Revenue Service. Keeping meticulous records of all income and deductions is important for accurate tax reporting.

Income from Investments and Assets

Generating income from existing financial assets and properties represents a passive approach to funding retirement. Dividend stocks and funds are a common strategy, providing regular income payments, typically quarterly. Focusing on companies with consistent dividend growth and stable operations, sometimes called “Dividend Kings,” offers a reliable income stream. Diversifying these investments across sectors helps mitigate risk while providing consistent cash flow.

Bonds and fixed-income securities offer another avenue for predictable interest income. Government, corporate, and municipal bonds, along with bond funds, pay interest regularly, providing portfolio stability. Bond laddering involves structuring bond maturities to create a continuous income flow for ongoing expenses. Certain municipal bonds can offer tax advantages, potentially providing federal and state income tax-exempt earnings.

Rental properties can generate a steady stream of income, contributing significantly to retirement funds. While rental income can be substantial, it comes with responsibilities like property management, though these tasks can be outsourced. Owners may also benefit from tax deductions for expenses such as mortgage interest, property taxes, and maintenance costs.

Annuities are financial products designed to convert a lump sum into a guaranteed income stream for a specified period or for life. Immediate annuities begin payments almost right away, while deferred annuities allow the investment to grow tax-deferred before payments commence later. Annuities can provide a predictable income floor, supplementing other retirement income sources and offering financial security against outliving savings.

Interest from savings accounts and Certificates of Deposit (CDs) offers a low-risk way to earn income from cash reserves. High-yield savings accounts, often offered by online banks, provide competitive interest rates higher than traditional savings accounts. CDs, in contrast, lock funds for a set term in exchange for a fixed interest rate, though early withdrawals typically incur penalties. All funds held in these accounts at FDIC-insured institutions are protected up to $250,000 per depositor.

Optimizing Social Security Benefits

Social Security benefits are a foundational income source for many retirees, and strategic claiming decisions significantly impact the total amount received over a lifetime. Understanding one’s Full Retirement Age (FRA) is important; this age typically falls between 66 and 67, depending on the year of birth. Claiming benefits before FRA results in a permanent reduction in monthly payments, with a maximum reduction of approximately 30% if claimed at age 62.

Conversely, delaying Social Security benefits past FRA can lead to substantially higher monthly payouts due to delayed retirement credits. For individuals born in 1943 or later, these credits increase benefits by 8% for each year delayed, up to age 70. Delaying from an FRA of 67 to age 70 can result in a 24% increase in monthly benefits, providing a larger, inflation-adjusted income stream for life. While delaying benefits is often financially advantageous, claiming early might be considered in situations of immediate financial need or shorter life expectancy.

Spousal benefits allow individuals to claim benefits based on their spouse’s earnings record, even with limited or no work history. A spouse can claim up to 50% of their partner’s primary insurance amount (PIA) at their own FRA. This option benefits couples where one spouse had significantly higher lifetime earnings. Survivor benefits are also available for eligible family members, including spouses, ex-spouses, children, and dependent parents, after a Social Security recipient passes away. A surviving spouse who has reached their FRA can receive 100% of the deceased worker’s benefit.

For those who continue to work while receiving Social Security benefits before reaching their FRA, the Social Security Administration applies an earnings test. For 2025, if an individual is under FRA for the entire year, $1 in benefits is deducted for every $2 earned above an annual limit of $23,400. In the year an individual reaches FRA, a higher earnings limit applies, set at $62,160 for 2025, with $1 deducted for every $3 earned above this limit until FRA is attained. There is no earnings limit once an individual reaches their FRA.

It is important to consider the taxation of Social Security benefits. A portion of benefits may be subject to federal income tax based on “combined income,” which includes adjusted gross income, tax-exempt interest, and half of Social Security benefits. For 2025, up to 50% of benefits may be taxed if combined income is between $25,000 and $34,000 for single filers, or $32,000 and $44,000 for married filing jointly. Up to 85% of benefits can be taxed if combined income exceeds $34,000 for single filers or $44,000 for married filers.