Freeing up some cash could allow you to enjoy your retirement more by allowing you to afford some luxuries. Alternatively, it may be necessary to pay for emergencies or care. It will depend on what assets you own as to what options you have for freeing up cash. Below are 5 of the most common ways in which people free up cash in retirement.
Consider an equity release
If you’ve owned the same house for several years and have built up a lot of equity, you could consider a home equity loan. This involves freeing up cash equal to the value of the equity you’ve built up in your home. This does have to eventually be paid back, but only after you die or sell your home. This makes it much better than a regular loan – you can live in the same home for the rest of your life and never pay it back.
Of course, anyone who inherits your home will have to pay it back. Loved ones will usually have no choice but to sell your home and repay the equity release from the returns along with any inheritance taxes. If you end up being forced to move out of your home to go into care, you will also need to pay back the equity release, which could mean less funds to put towards care fees.
Voluntary repayments are often possible if you would prefer to pay back some of the equity release while living in your home. Make sure to release the individual terms of any equity release before you commit.
Downsize your home
Downsizing your home could also free up a lot of cash if you are a homeowner. Smaller homes typically cost less than larger homes – if you’ve paid off most or all of the mortgage on your current home, you could buy another smaller home in cash and still have extra money left after the sale to use as you please.
Even if you currently rent a home and decide to downsize, it could mean cheaper rent and more disposable income each month. A smaller home could also come with cheaper energy bills. On top of this, it will be easier to manage in your retirement.
Downsizing does of course mean less space to put all your possessions, and you therefore may have to get rid of some stuff. This could force you to sort through some of your clutter and live more minimally.
Take on a lodger
If you’ve got a spare room, you could consider letting a lodger stay there. They can then pay you rent which can go towards paying off your mortgage – or if you’ve already paid your mortgage, it could go towards various other costs.
You’ll need to make sure that the room meets legal living standards. For instance, if you’re renting a loft space out to a lodger, there will need to be a staircase leading up to the loft for fire safety reasons and the loft ceiling will need to be high enough. You will also need to be comfortable letting a stranger stay in your home. There are guides online that can explain more about taking on a lodger.
Sell your annuity
If you have an annuity set up, it may be possible to sell this in exchange for a large lump sum. Periodic payment purchasers specialize in buying annuities and will be able to give you a sizable amount of money equal to most of the annuity you have left.
These companies do not pay you the full value of your annuity so you will make some loss. However, the benefit is that you can access your annuity fund as one lump sum as opposed to monthly installments.
Sell unwanted possessions
Do you have possessions of value that you could sell to free up cash? Some people invest in collectibles with the intention of one day selling them. Is now a good time to sell your collection? Alternatively, you may own valuable heirlooms that it may be time to part with. Antiques and old jewelry are worth getting valued – you never know what hidden treasures you may have inherited.
There are so many places to sell unwanted possessions. The internet is a good start – from Facebook Marketplace to eBay, there are so many platforms that can help you connect with buyers around the world. Alternatively, if you prefer to do things in person, consider selling to local second hand stores in your area or attend a flea market. You could even host a yard sale to sell some of your stuff.