A recent conversation with a friend inspired this article as the question he asked is not specific to only him and his wife. Many are conducting the same examination of their current retirement income strategies, and feel as though it may be hopeless. Following is his question. “My wife and I haven’t made the best decisions when it comes to retirement planning. As a result, we are now growing in age and don’t have nearly enough saved for retirement. Do we have any hope of a secure, and financially independent retirement?”
6 Quick Tips
- Identify how much savings you need
- Don’t take on more risk
- Pay down your debt
- Open a Roth IRA to save more
- Buy adequate insurance
- Play catch-up in saving for retirement
While your nervousness at approaching your retirement age with very little saved is understandable, your current situation is never hopeless. Take heart knowing that you are not alone. The latest Retirement Confidence Survey conducted by the Employee Benefit Research Institute identified that more than 33% of those aged 45 to 54 have less than $25,000 saved for retirement, and more than 25% of individuals 55 and older have less than $25,000 tucked away for retirement. The good news: you still have enough time to significantly improve your retirement income strategies, if you’re willing to start taking some serious steps now.
There’s no easy way to say this. In fact, let me be blunt about it. You need to start saving your you-know-what-off, now! To go from a point of saving virtually nothing to saving diligently will require discipline and some lifestyle adjustments. You have to be willing to spend less and save more, or your chances to live the quality of life in your retirement years that you desire is slim. For example, if you are able to save $500 a month with a return of 6% over the next 15 years, you would enter retirement with $145,000. If you can save $1,000 a month you would accumulate $290,000. A return of 6% is moderate and very common across all indices. Using the 4% withdrawal rule a nest egg of $290,000 would generate an annual income of $12,000. The moral is: the more you put away, the larger your nest egg. You can do it!
Get creative and be flexible. If you feel that you have fallen too far behind in saving towards your retirement income you may need to be open to other ways of enhancing your nest egg. Looking for additional sources of income serve you in two ways. One, it can help eliminate debt thus allowing you to increase your retirement contribution. Two, it draws in additional income to invest towards your retirement income strategies. You can also get creative. If you are a homeowner, for example, you may be able to tap the equity in you home for some extra retirement cash by downsizing to a smaller, less expensive home. You may be able to stay in your current home by taking out a reverse mortgage. You can explore these options in this plan from the Boston College Center for Retirement Research. A great, and growing strategy is to be creative in generating additional income by finding a side hustle, part-time job or turn a hobby into income. There are many opportunities to generate income from home on a part-time basis. You can be a translator, transcribe text, proof-read, blog, or become an Amazon automation associate. The opportunities really are abundant. This is far easier when you have eliminated your debt, reduced your spending habits, and have a plan in place.
“you can make immense progress if you’re determined and intentional about what you want to do.”
One of the most effective ways of boosting the quality of life in your retirement years is to postpone retirement and stay on the job longer. No only does continuing to work allow you more time to stash away money and increase your investment gains, it affords you the ability to delay claiming Social Security – allowing you to qualify for a greater monthly Social Security check in the future. And, of course, any additional years worked are years that your retirement income doesn’t have to financially support you.
Working with a knowledgeable retirement specialist eliminates a lot of the guess work and helps develop a personal income strategy that you can stick to. It may not be easy but it will absolutely be worth it. You can still improve your chances of achieving a secure retirement.
