According to a 2018 survey conducted by Bankrate, 37% of Americans have a side hustle. The same study also showed that the average side hustler can make an extra $8,000 per year!
Thanks to the gig economy and endless opportunities online, having a profitable side hustle is more realistic now than ever. Regardless of your schedule, family obligations, or experience, you can find a way to make extra money if you want to.
While the Bankrate survey showed that 38% of side hustlers use that extra money to cover regular living expenses, there are some very powerful ways that a side hustle can also help you to prepare for retirement.
1. Max Out Your 401(k) Contributions
One of the most common reasons why people don’t contribute to a 401(k) plan is because they say they don’t make enough money. If the salary from your job leaves you with very little discretionary income, a side hustle can be one of the best ways to improve the situation.
With the extra money from your side hustle to help with covering living expenses, you may be able to start contributing to a 401(k) on a regular basis. And if you’re already contributing a little, the income from a side hustle may allow you to increase your contributions significantly.
The first priority should be to contribute enough to qualify for the full matching contribution offered by your employer. If your side hustle allows you to contribute more, that’s even better.
A 401(k) isn’t the only option. You can also contribute to other tax-advantaged retirement plans like a Traditional IRA or Roth IRA.
2. Have a Long Term Focus (Build an Asset)
Side hustles come in all different shapes and sizes. If you’re simply looking for some extra money to cover bills or to have a little more for saving and investing, a simple weekend job can provide what you’re looking for. But if you’re looking to maximize the long-term impact of your side hustle, you may want to consider an approach that allows you to build a business.
Side hustles like blogging, creating an e-commerce business, or starting some other sort of business may not allow you to start making money as quickly, but it can be the more lucrative approach in the long run.
A business is an asset that can continue to bring value in the future. If you’re working as a rideshare driver for your side hustle, as soon as you stop driving, you’ll also stop making money. But if you create a successful business, which is possible as a side hustle, you may be able to increase your income without working more hours. You’ll also have the asset to sell at some point in the future, which can be a huge factor in your retirement plan. The lump sum from selling your business may be enough to put you over the hump for retirement.
3. Decide How You Want to Use Your Time After Retirement
When you retire from a traditional job, it doesn’t mean that you have to stop working completely and that you can never generate more income. Many retirees find that they like to use their time productively.
A side hustle can be extremely beneficial as a source of income after retirement. If your side hustle involves something that you enjoy, it can allow you to stay active and make some extra money without the stress of a traditional job.
Your post-retirement side hustle may be more about staying busy, or the income from the side hustle may be an integral part of your monthly budget. Either way, there are some significant benefits.
It’s a good idea to think about what you enjoy doing and how you might want to spend your time in retirement. There are plenty of hobbies that make money and you may be able to incorporate one of your own hobbies into a side hustle that you can continue after retirement. One option would be to start a blog, website, podcast, or YouTube channel related to your hobby and plan to continue to grow that online business post-retirement
While retirement may not be the primary motivation for your side hustle, there are definitely some very significant ways that a side hustle can help you to prepare for retirement. Be sure to consider the big picture if you’re a side hustler so you can get the biggest impact for the extra hours that you’re putting in.
About the Author
Marc Andre is the founder of the personal finance blog Vital Dollar. He has been a self-employed internet marketer and blogger since 2008, a business that originally started as a side hustle.