How Side Income Helps You in Retirement

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Your encore career: Which jobs need senior workers?

Continuing to earn income is probably the last thing you want to do in retirement. But a freelance side business is a great way to spend time in retirement. There are many benefits of working in retirement, even if you don't need the money:

Managing business activities keeps you active and engaged. It's extremely easy to start sitting around once you are no longer forced to get out and about every day. Some people manage fine, but many retirees start to lose the spring in their step a few years into retirement. A side income can keep you feeling productive and energized throughout your golden years, which is good for your physical and mental health. At the very least, you will have an interesting response if someone asks you, "What do you do all day?"

Extra income can reduce anxiety. Even if the math says you have enough saved, the future is unpredictable. You may be spending so little relative to your assets that every retirement calculator says you'll be fine throughout retirement, but it's hard to imagine not feeling nervous if another crash like the great recession trashes portfolio values again. Obviously, side income won't completely eliminate financial worries, but every dollar you bring in is going to make you more comfortable.

Save on taxes. A side business allows you to deduct many expenses on your tax return. The income you earn also gives you the ability to contribute money to tax-advantaged accounts, which will further reduce your tax bill either now or in retirement.

Keep your skills current. Continuing to work makes it much easier to jump back into the workforce if you get nervous about the market and believe you will need full-time income in the future. It's not easy to find employment at an advanced age if you've been out of the workforce for years, but a resume entry about being the founder of a small business sounds much better. If your business takes off you may even be able to expand your side business to replace your former full-time income if you need to.

Beginning to earn a side income can be difficult, and generally involves planning, work, skill and luck. But the Internet has opened up a huge window to make at least a small side income. You've spent decades accumulating skills and experience. Leverage this to make a little extra cash in retirement.

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