5 unexpected sources of retirement income

Most of us are looking forward to retirement, though it's also likely that we're at least a little worried about our income in retirement. We can probably count on some Social Security, but it was never designed to replace all our income.

Thus, it's up to us to make sure we have sufficient income streams to support ourselves in retirement. I've written before about sources of retirement income, such as fixed annuities, Health Savings Accounts (HSAs), reverse mortgages, and life insurance policies. Here's a look at five additional sources of income to consider for yourself.

No. 1: Refinancing your mortgage

Let's start with an easy source of unexpected income -- refinancing your mortgage. This won't work for everyone, but if you're carrying a mortgage with an interest rate that's about a percentage point higher than prevailing rates and you plan to stay in your home for several years or more (at least long enough to have your savings offset the closing costs), refinancing might be worthwhile.

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If you refinance a $2,000 monthly mortgage payment into, say, a $1,600 one, you'll have $400 more in your pocket each month, which can be rather handy in retirement. Note, though, that refinancing means you start the clock ticking all over again, with 30 or perhaps 15 fresh years of repayments ahead of you. You can shorten that period by paying more each month, of course, and it's not a bad idea to aim to enter retirement mortgage-free, if possible, too.

No. 2: Selling stuff online

Many retirees and soon-to-be retirees think about thinning out their belongings -- perhaps because they're hoping to move into a smaller home, or maybe just because they want to own fewer things and realize they don't need many of the things they've accumulated. If that's you, you may be able to generate an income stream in your first few years of retirement by gradually selling items from your garage, basement, attic, and/or storage unit.

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You might do so via eBay, or through a series of yard sales. Companies that specialize in estate sales may be able to help you unload some items, and if you have potentially valuable collections of anything, you might find an appraiser to help you decide how to proceed. You could even donate many items to charity, enjoying a tax deduction for your trouble. Note, though, that you'll need to have receipts and to list the fair market value for used items. You'll also have to itemize your deductions if you want this tax break, and your total deductions will have to exceed your (recently increased) standard deduction for this to be worth it.

No. 3: Paying off debt

Here's another way to keep more money in your pocket that you might not have thought of: Paying off any high-interest-rate debt that you've been carrying. It's generally good to aim to enter retirement with as little debt as possible, in order to help keep your expenses down. That's especially important with high-interest-rate debt, such as that from credit cards.

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Imagine, for example, that you owe $20,000 and you're being charged a not-uncommon interest rate of 20%. That amounts to about $4,000 that you fork over every year in interest alone! Once that debt is paid off, you'll be keeping that $4,000 for yourself instead of handing it over to a credit card company. Getting out of debt isn't always easy, but it can be done -- and many people have successfully paid down massive debts.

No. 4: Collecting credit card rewards

If you're saddled with hefty credit card debt, this income-generating route isn't best for you. But if you're able to keep your credit card spending in check, you may be able to collect some cash for it -- or credits on your statements or other rewards, perhaps for shopping or travel. You just need to examine your spending habits to see what categories get big chunks of your money and to learn more about the best credit cards out there. There are lots of good cash-back credit cards that offer up to 2% or more back on just about anything you buy. If you spend, say, $1,000 per month with credit cards, that's $12,000 per year, which would get you $240 back each year.

You might collect even more by being more targeted and strategic. If you spend a lot on groceries, for example, you might use a card that gets you 6% back on that spending. If you spend a lot at Amazon.com, you can get 5% back on those purchases with the right card. Some cash-back cards offer rotating categories in which you can earn 5% back, so you might save up your home improvement purchases for the right month. Those who travel frequently (once the pandemic is behind us) can benefit from travel-related credit cards to rack up lots of points and rewards that can be used instead of cash, keeping more cash in your pocket.

No. 5: Renting out space in your home

Finally, think about your home. You might save money by downsizing into a less costly one, but you could generate income without moving, too. You might rent out space in your home -- or your whole home -- for short periods, via services such as Airbnb or Vrbo. If you can get $150 per night and you rent out your space for 20 nights per year, that's $3,000 in extra income! Depending on where you live, you may be able to charge much more.

However you do it, you'll need income in retirement. So be sure to plan for how you'll do so, and to save aggressively and invest effectively to set up a financially secure future for yourself.