9 Ways To Make Extra Money in Retirement

You spend years looking forward to and preparing for retirement. However, once you get there, you might discover that retired life is more expensive than expected. 

“There’s an old rule of thumb that you can expect to spend 80% of what you spend while you’re working in retirement, but I find that people want to join the clubs, people want to go work out, people want to go boating, and they want to travel a lot to see their grandchildren who live in other states,” said Ashley Terrell, a registered investment advisor in the West Palm Beach, Florida office of Burns Estate Planning & Wealth Advisors. 

Social Security benefits only replace about 39% of past earnings for retirees who claim payments at age 65. That means you’ll have to make up the difference with your retirement savings, a pension (if you’re lucky enough to have one), and income.

Earning income doesn’t necessarily mean you must keep working, although that is one way to do it. Many passive income opportunities can allow you to sit back and reap the income rewards—after a few strategic maneuvers. 

Learn more about the different ways you can earn income in retirement.

General Tips for Retirement Income

Before getting into the specific strategies, there are a couple of ground rules to think about when looking for ways to earn money in retirement. 

Create a Budget

Be more mindful about your spending in the years leading up to retirement, said Terrell, so you can get a more realistic sense of how much income you’ll need. 

“I’ve seen such expense blindness with some clients,” said Terrell. “They’re making a couple hundred thousand dollars a year, and they’re actually not saving as much as they should be, and they don’t realize how much they’re spending.”

She recommended creating a retirement budget before you retire to test yourself and see how it feels and what your expenses will look like. 

Diversify Income

Just like with your retirement accounts, when you think about post-retirement income streams, you don’t necessarily want to focus on just one strategy. Instead, go with a mix of short-term and long-term income streams. And while you should mostly focus your efforts on choosing steady, fixed-income opportunities, there’s nothing wrong with sprinkling in a little risk if the return potential is strong.

9 Ways To Make Extra Money in Retirement

Once you’ve set a budget and looked into diversifying income streams, you can consider some of these options for bringing in extra money to fuel your retirement lifestyle.

1. Short-Term Bank Savings Accounts

One of the simplest ways to earn money on your money is to keep some of it in a high-yield savings account (HYSA). In periods of higher interest rates, people have earned 4% to 5% or more. You might as well make a few extra bucks on money you keep liquid and have easy access to.

2. Money Markets

Besides HYSAs, the other major option for storing some liquid cash is a money market, said Terrell. “It’s been a really safe place the last couple years.” One benefit of money markets is that they pay monthly versus a CD that only pays you at maturity.

3. CDs

Certificates of deposit can be attractive during times of higher interest since they earn a fixed rate that you get at the end of the CD’s maturity period. 

“If you can lock into a CD at today’s rates, you will be a little more successful than the person who thinks rates are going to stay static,” said Steven Conners, founder and president of Conners Wealth in Scottsdale, AZ. The downside is that you’re tying up some cash for a set period of time since most CDs will charge a penalty if you try to withdraw earlier. 

That said, you could also look into brokered CDs, said Terrell. A brokered CD is essentially the same type of product you’d get from a bank, only you purchase it through a brokerage firm. The benefit is that brokered CDs are more liquid because they’re traded on the secondary market. So if you purchase a 12-month CD and really need the cash six months in, you can sell the CD on the secondary market. 

“Someone else is going to get the interest for the remaining period, but you’ve gotten your principal back, and you’ve gotten the interest for the period in which you held it, and there’s no penalty,” said Terrell.

4. Annuities

For retirees who are afraid of running out of money, annuities are an increasingly popular income option. In fact, total U.S. annuity sales increased 26% in the second quarter of 2024 from the prior year, reaching its highest level, according to LIMRA’s U.S. Individual Annuity Sales Survey.

An annuity is a type of insurance policy. “You give the insurance company money, and they promise to pay you a certain amount, either monthly or annually, for a set period of time—a lot of times it is for life,” said Terrell. So even if you outlive the policy value, you’ll still get that guaranteed income.

Work with a professional since annuities can be complex and come with fees. Both Terrell and Conners recommended going with a fixed indexed annuity versus a variable annuity, which is subject to market risk.

5. Dividend Stocks

Dividend stocks are shares of a company that pay investors a percentage of the company’s earnings. That means you’ll earn monthly, quarterly, or annual income with these stocks.

The key when selecting a dividend stock is to research the dividend track record, said Conners. “Look for companies that have raised their dividends every successive year. Are they a shareholder-friendly company? It’s important to do that screen,” he said. 

You can start with dividend aristocrats, he said. Those are companies that have increased the dividend it pays to shareholders for at least 25 straight years. 

6. Bond Funds

Another investing option is bond funds, in which you’re essentially lending your money to the government or corporations, and in return, they pay you interest. Rather than buying just one individual bond, a bond fund is a collection of government or corporate bonds. 

“This is a relatively safe area to invest in,” said Conners, who also pointed out that they can be especially appealing if interest rates are falling. Income will vary each month.

7. REITs

One way you could get into the real estate game without some of the potential headaches of property ownership is investing in a real estate investment trust (REIT). “They’re good for diversification,” said Terrell. But like other types of investments, you’ll want to do your homework to understand how they work, the different types of REITs, tax implications, and the various strategies for incorporating them into your portfolio.

8. Real Estate Rental Income

Owning real estate that generates rental income, such as having a tenant in a two-family home you live in or owning investment property, is a way to earn passive income in retirement. But it comes with risk, hands-on attention, and ongoing maintenance costs.

If you’re currently in that world, you’ve already done much of that heavy lifting and know what to expect. But if you’re looking to invest in real estate for the first time as a retiree, be sure you understand everything involved.

9. Part-Time Job or Side Business

Not all retirees want to stop working altogether, as many discover they enjoy using their skills and talents to earn some side income. Some want to keep active and get out of the house. Whether you create online courses, become a tutor or consultant, try your hand at freelance writing, or become a part-time department store associate, it can help you earn extra pocket money to cover fun outings and other retirement enjoyment. However, once you earn over a certain threshold, it could cut into your federal benefits.

“I’m seeing a lot of people getting contract work and with that, you have to be very careful not to go over your income thresholds,” said Terrell. That’s because if you make more than $22,320 in earned income in 2024, Social Security will deduct $1 for every $2 you earn above that amount. 

The Bottom Line

Even if you’ve done a good job of saving for retirement, those funds are limited, and Social Security benefits usually will not cover your expenses. However, if you can generate some additional income streams, those extra funds can help your retirement savings last longer by covering unexpected expenses and allowing you to enjoy your ideal retirement lifestyle. Even better, it can remove some of the worry about running out of money.