The thought of working forever can be downright depressing. But many retirees would benefit from a part-time gig that generates a side income. Here are several reasons building up another income stream could improve your retirement prospects:
Satisfaction beyond the financials. Especially at the start of retirement, many retirees are anxious about their nest egg keeping up with their lifestyle. Having a supplemental income can help reduce your dependence on your portfolio’s performance, which could lead to less stress and a better quality of life.
Fill up your schedule quickly. Some retirees have trouble finding activities to fill up the whole day, every day. With a side gig, boredom won’t be a problem. But make sure you are starting a side business in an area you are passionate about. You’re likely to know more about a business that is personally interesting to you, which will make your time at work more pleasant and could even make you more likely to earn a profit.
A trial before full retirement. While some retirees are perfectly happy to fill their days with leisure activities, other people feel more fulfilled if they are working and feel like they are making decisions that matter. It's difficult to figure out how you will react until you are already retired. With a side gig, you will be able to continue exercising your mental abilities while paring back the time and commitment a full-time job requires.
Maintain and grow your network. You might like to go back to the workforce one day. Or maybe you just want to keep up with your colleagues and friends and stay current on industry changes. When you retire, you often lose touch with colleagues and professional contacts. But if you have a side business, you will naturally evolve along with your industry and your contacts.
Improve your social life. You are likely to meet many new people through the course of building your side gig. You will also have great stories to share amongst your friends, because the quest to maintain a side business is always interesting. A side business gives you a great answer when someone you meet asks, “What do you do?”
A higher income. The income you receive through a side gig will boost your retirement security. It will help reduce the need to withdraw from your nest egg and ease the tension whenever stocks have subpar performance. And once you set up a steady income, those who are so inclined could even get more aggressive with their investments and potentially increase long-term returns.
The caveat is to select a side business that doesn't require a substantial amount of time and upfront financial commitment. But if you pick the right one, it could allow you to retire sooner and improve the quality of your retirement life.
David Ning runs MoneyNing, a personal finance site that shares money moves you can make to significantly increase your chances of having a comfortable retirement. He likes to share simple changes that anyone can make, such as picking the best online savings account and figuring out whether a 0 percent balance transfer credit card makes sense.