by Chris Price
After decades of working hard, people look forward to enjoying their golden years with carefree ease. But all too often as the time to retire comes closer, the dream of being able to kick back, relax and enjoy life moves out of reach.
A 2018 report by Northwestern Mutual Life Insurance Company found 78 percent of Americans are concerned they cannot afford a comfortable retirement, and two-thirds think they will outlive their retirement savings.
A look at some of the survey’s findings paint a bleak picture:
• 21 percent of Americans have no retirement savings.
• 33 percent of Baby Boomers have less than $25,000 tucked away.
• 46 percent of adults have not made changes to their retirement planning to account for outliving their savings.
According to the Centers for Disease Control and Prevention, the average American can expect to live to 78.6 years old. For men, the average is 76.1 years and 81.1 years for women.
Last year, the average Social Security benefit payment was $1,422 a month or $17,064 a year. That’s just $4,574 above the Census Bureau’s 2019 poverty threshold for a single-person household.
With personal coffers not funded to afford the quality of life people hope for in retirement and concern that funds for social safety nets will be reduced and possibly unavailable, the expected age that one may retire is trending upward.
Considering inflation is a fact of life, the cost of living will increase in the future. Properly planning for retirement can make all the difference in enjoying a stress-free lifestyle or continuing with the daily grind. AY magazine wants its readers to be able to live the life they want to lead, and is offering these tips to prepare for the best days of their lives.
1. Start planning as soon as possible
Retirement planning needs to begin at the beginning of a career. AARP recommends a retirement nest egg of $1 million to $1.5 million or savings of 10 to 12 times your current income. Those are daunting numbers. But they are achievable if you put as much money aside for retirement as you can as soon as you enter the workforce.
2. Create a budget and stick to it
Families and individuals need to know how much they are bringing in and how much they can afford to spend and save. Be smart and frugal and don’t blow money on frivolous items. Stay committed to a budget through your working and retirement years.
3. Open and monitor an investment account
If you work for a company that offers a retirement program and will match what you put into it, maximize your contributions. With compound interest, over time the account will grow exponentially, but the key to its full potential is to start while in your 20s.
4. Work with a financial adviser
Use the knowledge and expertise of a reputable financial adviser to help you achieve your goals. Share your goals and let them coach you to the right investment vehicle(s) for your needs. Monitor your account’s results with an adviser to make sure they are in line with your life plan.
5. Talk with your spouse or significant other
Together you can maximize your savings potential by each contributing to a retirement account. Establish goals and dreams, and work toward them together.
6. Focus on your health
American health care costs are increasing. The best way to avoid them is by getting and/or staying as healthy as possible. This will reduce costs during your working years and allow you to save more for the future. In addition, be aware of family medical histories. There is emerging evidence that diseases like dementia and Alzheimer’s, which may require as much as a decade of expensive late-in-life care either at home or in a memory-care facility, are genetic.
7. Pay off your mortgage
With a home paid off, a considerable monthly expense disappears allowing you to live “rent free” while transferring those funds to your retirement savings.
8. Keep up with regulations
Limits to the amounts you are allowed to put into a retirement account loosen as you age, and you can make “catch-up contributions.” Ensure you are directing as much into your savings as possible.
9. Plan to work past 65
Working a few extra years provides more time to generate savings through salary and investments. Additionally, hold off on taking Social Security too early. Waiting to claim your payments just five years past the eligible age of 65 will increase monthly benefit payments.
10. Avoid overspending
If you have a house that’s too big for an empty nest, downsize. Save money on taxes and maintenance costs that could go toward improving your financial position, especially when the days of steady income are coming to a close or have passed. In addition, take advantage of cheaper medical rates by signing up for Medicare. There is a seven-month window that opens three months prior to turning 65.