Am I going to have sufficient money to retire? That is the #1 financial concern among 66 percent of Americans, according to a Gallup poll, even though many of them have long-term retirement savings plans.
I recall when I was always checking my retirement nest egg to see if it was ready to hatch or if I needed to incubate it a bit longer. I can’t imagine what it’s like for millions of Americans nearing retirement age who haven’t saved. These Americans will often outlive their assets, and then what?
I’m thankful for a job that provided retirement benefits, and I’m even more thankful for a spouse who had the foresight to think about our old age when we were young. People really have to take responsibility for their own retirement security, and not wait until age 50 to begin.
A helpful way of thinking of it is to consider saving for retirement as a second job. Here are some strategies to achieve or work toward to help retire with security:
- Be debt-free before you retire. Take stock of your situation and create a plan to reduce your debt immediately. Your retirement may need to be delayed accordingly. Many experts still recommend owning one’s home before or at retirement, or downsizing. What works best for you?
- Design a budget for saving and spending (this is a must for everybody really). Don’t just spend what comes in. Once retired, many professionals recommend a 4 percent spending rate of your retirement savings, which (accounting for interest and inflation) should last for 30 years.
- Think twice before leaving the workforce. Make sure you are ready because it will be harder to get a job once you’ve left it. Be sure you know what benefits will follow you into retirement. Medical? Pension? Be careful if you are offered a buyout, which often happens to enable companies to replace older, higher salaried employees with younger less expensive junior employees.
- Optimize your tax strategies, such as using appreciated stock or mutual funds to make charitable contributions of $1,000 or more. The tax-exempt charity won’t pay tax on your stock profit, and your donation will be tax-deductible. Consult a tax expert for other ideas.
- Don’t be an ATM to your kids or grandkids. Be smart about how you give away money.
- Determine the best time to tap into Social Security benefits. There are several online calculators available to help you maximize your social security benefits. We used this social security calculator developed by Boston University economist Laurence Kotlikoff.
- Be prepared for the unexpected.
- Have your legal documents in order, such as will and medical power of attorney. Retirees also should consider investing in long-term care insurance, which typically covers the cost of home care, nursing-home care, and assisted living, usually not covered by traditional health insurance.
- Enjoy spending within your means. None of us know how long we are going to live, so sometimes it’s hard to judge just how much we have and fear sets in that we’ll run out of money.
- Consider developing another income stream to help support you during your retirement years. For example, here are some great ways to make money online.
One solution often suggested is to buy an annuity. An annuity is a pot of your money that an insurance company converts into regular payments until one’s death. But be aware that annuities also involve risks, so again, counsel of a trusted financial counselor is a wise move.