Release date: February 22, 2021 Shana Yuri
For most people, retirement is a time when you can finally do what you want. You don’t have to fulfill professional obligations, and you can learn new hobbies or spend more time with those you already love.
However, you may also find that you do not have enough money during this period. If you don’t have money, finding ways to grow your savings can be daunting and stressful. Fortunately, there are many ways to use your home to generate income during retirement.
As a father, you probably have one or two rooms in your home that are not being used. This option may be even better if you have a basement or stepmother’s room that is not being used.
Instead of renting out the empty space in your home, you can rent it out to a tenant. Monthly rent is a great way to make extra money that will help you stay financially stable.
In addition to bringing in extra money each month, you can also use your rental property as a tax deduction. If you rent out part of your home, you can deduct a percentage of your rental property.
Other tax deductions include mortgage interest and property depreciation. Consult a tax professional for more information on possible deductions when you rent property to a tenant.
As with most things you’ll encounter in the landlord business, there are things no one likes, such as selecting tenants, paying for repairs and, worse, evicting the tenant when the time comes. Weigh the pros and cons of renting out a room, basement or other property to generate income.
Starting a small business
When most people think of small businesses, they think of “mom and pop” service businesses like plumbers and electricians or even niche bakeries and restaurants.
You don’t have to work as hard as entrepreneurs to make money in retirement. You can turn your passion into money by starting a business and selling the things you make.
Retirement is an ideal time to learn how to use your creative side with photography, drawing or painting. You can easily sell photos or illustrations on websites like Etsy and make a lot of money without ever leaving your home.
Even if you want to get out of the house and use the world as a source of inspiration, you can run your business away from home.
As mentioned above, you can use the guest room as a studio and operations center. If you use this space exclusively for business purposes, you can deduct it on your tax return.
There are two ways to deduct your home office from your mortgage and utilities. The first is to deduct the percentage of your home that the room occupies. If the room makes up 5% of your home, you can deduct it from your expenses.
The other option is to multiply the area (up to 300 square feet) by $5. If your studio is 200 square feet, you can deduct up to $1,000 per month. Consult with a tax expert to make sure your calculations are correct.
Taking out a reverse mortgage
If you fear that you will not have enough money when you retire, but you do not want to work or take on a tenant, you can take out a reverse mortgage. If you do not plan to retire, you probably have a large amount of equity in your home.
This allows you to take out a reverse mortgage with the equity in your home as collateral, which serves as tax-free money for your retirement.
As with most loans, certain conditions must be met to obtain a reverse mortgage. These include the following:
- You must have or own at least 50% of the equity in your home. Some lenders may require more than 50%.
- Your home must be your primary residence, meaning you reside there most of the year.
- You must agree to set aside money from your loan at closing or have enough equity to pay property taxes and outstanding insurance.
- Your home must be in good condition. If your home does not meet this standard, the lender will tell you what repairs must be made before you are eligible for assistance.
- You should consult with a HUD-approved counselor to discuss eligibility, financial implications, and other financial options.
If you qualify for a reverse mortgage, you can take solace in the fact that you don’t have to make any monthly payments to pay it off. In fact, you won’t have to pay it off until you or one of your heirs sells the house.
At this point, you can use the equity from the sale of the house to pay off the loan.
To learn more about current interest rates and your rights, use this reverse mortgage calculator.
You can make a lot of money with the capital you have built up in your home. We have found that when you retire, you probably have unused rooms in your home. If you don’t plan to use those rooms for anything, you can reduce them.
Sell your current home and buy a smaller house or move into a smaller apartment.
You can use the money you earn on your home as a large down payment on your home loan, and in some cases even on your household allowance. This makes it easy to save on your mortgage payment, if you still have one, utilities and property taxes.
Even if you can’t put that money in your savings account, increase your retirement fund by extending its life.
Frequently asked questions
How will you make money when you retire?
How retirees can make money in the comfort of their own homes
What are the five sources of retirement income?
Sources of income for retirees | FINRA.org
What are the general sources of retirement income?
10 sources of retirement income | U.S. News Retirement Planning
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