What do you do when you’re more than ready to retire but your nest egg is less than you’d like? First, find some comfort in the fact that you aren’t alone. In fact, 3 out of 10 baby boomers aged 55 and have done nothing in terms of saving for retirement and of those who have, 26 percent have less than $50,000 saved according to GoBanking. Next, check out these tips on how to save and earn for the retirement you deserve.
Facts on Saving for Retirement
Before you panic, it’s important to understand how much you may actually need for retirement. To maintain the same standard of living, it’s a general rule that you should save enough to replace approximately 70 to 90 percent of your pre-retirement income. Of course, there are several variables to consider there such as your age when retiring as well as where you live - not just geography-wise, but whether you plan to stay home or move to senior living.
In a recent blog we detailed what you can expect financially at home and in senior living [link to Why Home is Not Always Cheaper than Senior Living].
What’s more, Fidelity’s most recent Retiree Health Care Cost Estimate states that the average 65-year-old couple retiring in 2020 can expect to spend $295,000 on medical expenses throughout retirement.
Ways to Save
If you find that you do need to catch up in saving for retirement, there are some quick ways to start doing so. They include:
● Catch-Up on Your Contributions – At age 50 you can start making extra contributions to your IRA and 401(k) accounts up to an additional $6,500 for 401(k)s and $1,000 for IRAs according to the IRS. Along the same lines, it’s helpful to consult with a financial advisor as you near retirement to analyze all your investments with long-term needs in mind.
● Don’t take Social Security, Yet – Although you may be able to start collecting it now, by waiting until age 70 you can maximize your monthly benefit.
● Decrease Spending – Take a close look at where and how you spend your money you may be able to make considerable cuts. Start by canceling automatically renewing subscriptions as well as memberships you don’t use. Then cut down on entertainment and dining out, as well as cell phone and cable expenses. Also consider buying generic when purchasing groceries and personal care items; the products are often comparable for much less.
● Sign Up for Medicare – At age 65 you can sign up for Medicare even if you still work. If you are covered by health insurance at work, compare the costs and features of both and select the one that’s most cost-effective for you.
● Downsize Your Home – If your home is large and you’re no longer using all the space, consider whether it’s time to downsize to a smaller home or potentially an independent living community in senior living. You could use any money earned towards your savings. If you want to keep your home, but need income you might consider a reverse mortgage.
● Minimize the Taxes You Pay – If you’ve always done them yourself, consider talking with a tax planner to make sure you’re taking all the deductions in which you qualify.
Ways to Earn
In addition to saving for retirement, there are still ways to earn too! They include:
● Sell What You Don’t Need – Marie Kondo does have a point that we all have too much clutter in our lives. If you are considering downsizing it’s the perfect time to sell some of those items you no longer need or want whether it’s décor, furniture or even that second car that just sits in the driveway.
● Get a Job – But you’re supposed to be retiring right? Don’t worry, we’re talking about a part-time job with less responsibility and more flexibility – so it won’t cramp your retirement style! In addition to earning extra cash, part-time jobs also help you to stay active, meet new people and perhaps find renewed purpose. Depending on your skillset you could tutor, freelance or do consulting work. Or, perhaps work in an area in which you’ve always been interested, but never had the chance to try.
For more information, download our Family Guide to Funding Senior Care & Housing or contact Friendship today to request your virtual or in-person tour!