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While inflation has cooled compared to recent highs, there have been upticks in the inflation rate over the last few months, and, as a result, the cost of living remains elevated. That’s making it harder for the seniors who are on fixed incomes to cover all the costs they face in retirement. The recent issues with stock market volatility aren’t helping much, either.
And, those are hardly the only money-related issues seniors are facing right now. Rising costs in healthcare, housing and other sectors are also making it harder for retirees to make ends meet financially. And, 84% of retirees want to better protect their savings from eroding due to inflation, according to Schroders 2025 U.S. Retirement Survey.
Amid this challenging environment, many retirees are looking for ways to increase their income and free up room in their budget so they can enjoy the retirement they deserve. So, what can you do to achieve this?
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5 ways to maximize your retirement income now, according to experts
Here are five effective ways experts say you can maximize your retirement income now.
Delaying Social Security to increase monthly payments
You can begin taking distributions at age 62, but one of the best ways to maximize your retirement income is to delay receiving your Social Security benefits until after age 70. Each year you wait increases your monthly benefit by about 6% to 8%, and by the time you turn 70, the benefit could be nearly twice what it would have been at 62, according to the IRS.
Still, deciding when to start receiving Social Security should be based not only on financial considerations, but also on your health, risk level and future plans, says Vanessa Alanis, CFP and owner of Black Dog Wealth.
“A client I worked with was planning on delaying Social Security. However, in her 60s, she was diagnosed with a form of cancer that reduced her life expectancy,” Alanis says. “We updated her plan and decided to start taking Social Security immediately. This change allows her to utilize her benefit and live a richer life now while she can.”
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Downsize or relocate to reduce housing costs
Cutting back on expenses is another great way to add cushion to your monthly budget in retirement, experts say. Downsizing to a smaller home may be an effective way to reduce mortgage, utilities and other expenses. Or, relocating to an area with a lower cost of living is another way to make your money go further.
Alanis notes that many of her clients downsize to reduce housing costs, often choosing homes they can pay off in full.
“The removal of a mortgage payment can reduce a client’s expenses by thousands of dollars per month,” Alanis says.
But before you start packing up your moving boxes, make sure you run the numbers to make sure it works for you. And, don’t forget to include surprise expenses like closing costs, moving expenses, HOA fees, property taxes and repairs or upgrades to the new home.
Use annuities or reverse mortgages for guaranteed income
With an annuity, you pay an insurance company a lump sum and receive reliable monthly payments in return, making it a good option to consider if you’re concerned about outliving your money. But while annuities can arm you with an income stream in retirement, be aware that once your money is locked in, you have limited access to it and your funds may not earn as much as other investment options like stocks and mutual funds.
A reverse mortgage is another good option to consider, as this type of borrowing tool lets you tap into your home equity without having to sell your home. You can use the funds to help meet everyday expenses and continue to live in your home. The loan is repaid when you sell the house, move out or die. That will leave less for your heirs, but the benefits could be worth the tradeoff for some seniors.
“Reverse mortgages are highly regulated and very safe today,” says Jeff Lichtenstein, CEO and broker at Echo Fine Properties.
Retirees also need to consider the emotional side, Lichtenstein says, since many want to stay in their homes and must weigh that against the true cost of relocating.
Take advantage of catch-up contributions or part-time work
If you are 50 or older and haven’t saved as much as you’d like in an individual retirement account (IRA) or 401(k), you may be able to deposit more than the normal limit allows by making catch-up contributions. This option can help you course-correct and get your retirement savings back on track.
The guidelines for 2025 state that you can put in an extra $1,000 to an IRA and an extra $7,500 to a 401(k), 403(b) or 457(b). For those ages 60 to 63, the limit increases to $11,250 if your plan allows for it, but once you turn 64, it returns to $7,500.
“Catch-up contributions are underutilized,” says Dominick Leuzzi, an investment advisor and financial planner at Walsh & Nicholson Financial Group. “A 60-year-old couple I worked with each maxed their 401(k) catch-up ($7,500 a year each) plus IRA catch-up ($1,000 a year each), and added part-time consulting income. Over seven years, they increased retirement savings by over $250k, which — when invested — gave them the confidence to retire on schedule.”
Taking on part-time work can also inject revenue into your budget, though you’ll give up some of your free time. Alanis points to a client who started a part-time consulting business for extra income.
“Not only did he end up exceeding his financial goal of securing his retirement, but his life also became fuller and more enjoyable,” Alanis says.
Review tax-efficient withdrawal strategies
Another way to improve your bottom line in retirement is to strategize how and when you withdraw money from your different accounts. One approach is to withdraw from each account annually based on its share of your total savings. Another is to tap taxable accounts first if you have large long-term gains and may qualify for the 0% capital-gains rate.
“It can be difficult to understand the impact of taxes on retirement withdrawal strategies, especially when trying to do it in your head,” Alanis says. “A common technique is to map out a Roth conversion strategy for the first few years of retirement, when lower income may put you in a reduced tax bracket. That can make your withdrawals more efficient over the long run.”
The bottom line
The strategies outlined above can help you stretch your dollars in retirement, and you may be able to maximize the impact by combining several of these strategies. Consider making catch-up contributions, delaying Social Security distributions and utilizing the other approaches above to reduce financial strain on your budget. It could also make sense to consult a financial advisor you trust if you need guidance or a plan tailored to your situation.
