For most people, retirement is a time to finally do what you want. There aren’t any career obligations that need to be met and you can learn new hobbies or dedicate more time to the ones you already love.
However, money can also be tight during this time. If you don’t have any sort of cash flow, finding ways to stretch your savings can be scary and stressful. Fortunately, there are several ways that you can use your home to generate income during retirement.
Rent Out a Room
As an empty nester, there’s a good chance that you have a room or two in your house that’s not being used. This can be an even better option if you have a basement or mother-in-law suite that isn’t being used.
Rather than letting empty space in your home go unused, you can rent it out to a tenant. The monthly rent is an excellent way to bring in extra money to help keep you financially stable.
In addition to bringing in extra cash each month, you can use your rental property as a tax deduction. If you’re renting out a portion of your home, you can deduct the percentage of your home that is being rented out.
Further tax deductions include mortgage interest and property depreciation. Speak with a tax professional to learn more about available deductions that come with renting property to a tenant.
As with most things, there are parts about being a landlord that nobody enjoys such as screening tenants, paying for repairs, and, worst of all, evicting a tenant if that’s what it comes to. Weigh the pros and cons of renting out a room, your basement, or another property to bring in income.
Start a Small Business
When most people think about small businesses, they think about the mom and pop service companies like plumbers and electricians or even the bakeries and niche restaurants.
You don’t have to work as hard as those business owners do to bring in extra money during retirement. You can turn your hobbies into cash by running a small business and selling items you create.
Retirement is a great time to learn how to tap into your creative side with photography, drawing, or painting. You can easily sell photos or illustrations on sites like Etsy and bring in significant money without ever leaving your home.
Even if you want to get out of the house and use the world as your inspiration, you can run your business out of your home.
As previously mentioned, you can use a spare bedroom as a studio and center of operations. If you use this room solely for the purpose of your business, you can use it as a deduction when you file taxes.
There are two ways you can deduct your home office from your mortgage and utilities. The first is by going off the percentage of your home the room occupies. If the room is 5% of your home, then you deduct that from your expenses.
The other is multiplying square footage (up to a max of 300 square feet) by $5. If your studio is 200 square feet, you can deduct up to $1,000 monthly. Speak with a tax professional to make sure that your calculations are correct.
Take Out a Reverse Mortgage
If you’re worried about not having enough money during retirement but you don’t want to work or take on a renter, you can take out a reverse mortgage. If you’re not planning on moving to a retirement center, you probably own a high level of equity in your home.
This allows you to take out a reverse mortgage against the equity you have in your home as tax free cash to help with your retirement.
Like most loans, there are requirements that must be met to qualify for a reverse mortgage. These include:
- You must have at least 50% equity in your home or own it outright. Some lenders might require more than 50%.
- Your home must be your primary residence, which means that you spend the majority of the year living there.
- You must agree to set aside funds from your loan at closing or have enough of your own funds to pay continuing property taxes and insurance.
- Your home must be in good condition. If your home does not meet this standard, the lender will let you know repairs that need to be made before you qualify.
- You must receive HUD-approved counseling to discuss eligibility, financial implications, and other financial options.
If you qualify for a reverse mortgage, you can feel comfortable that it won’t come with any monthly payments to pay it back. In fact, you won’t have to pay back the loan until you or one of your heirs sells the home.
At that point, you can use the equity from selling the home to pay back the loan.
To learn more about current interest rates and your eligibility, use this reverse mortgage calculator by All Reverse Mortgage.
You can get a lot of money from the equity you’ve built in your home. We’ve established that you probably have unused rooms in your home during retirement. If you don’t plan on using those rooms for anything, you can downsize.
Sell your current home and buy a smaller one or move into a smaller apartment.
The money you make off your home can be used as a large down payment on a home loan or in some cases even pay for the home outright. This makes it easy to save money on a mortgage payment if you still have one, utilities, and property taxes.
Even if you aren’t able to put any of that money into your savings account, you’re growing your retirement fund by making it last longer.