Retirement, you may be looking forward to or you may be hating the thought of it, or both, at the same time. How can that be? Well, we are living longer, more active lives. But a shifting economy has put a dent into the finances of millions of Americans approaching retirement age.
As such, many Americans are worried that they will run out of money at some time during their retirement. But you don’t need to worry and here are some of the strategies you can use to make sure you have the money you need.
Let’s start with something that you need to know about retirement planning.
Some experts have concluded nearly half of the workers approaching retirement age lack the savings they need to enjoy retirement.
In absence of savings or a pension, this means that these workers will need to rely on Social Security – which many believe will run out of money before 2030.
To make matters worse an Ipsos/New York Life survey recently found that 75% of those questioned did not know how much they could safely take out of their retirement savings each year.
This is a big problem as a 60-year-old man living today is expected to live to be 85 or older.
It’s an even bigger problem when you consider that healthcare costs for most Americans will soar after they reached the age of 80.
What does this mean? Well, Baby Boomers are in a tough spot. Not only have they had to live through one of the most volatile economies in the history of the U.S. but they are also rushing towards retirement at lightning speed.
However, the news is not all bad.
For one thing, it is never too late to change the course of your retirement planning.
In addition, living longer means we have more years to earn additional income needed to enjoy retirement.
What are some of the things you need to know about retirement planning? Well, it starts with knowing how to figure out how money you will need to survive.
This includes calculating monthly expenses, healthcare costs, and have additional funds available for discretionary spending.
When calculating, remember to factor in inflation as even 2% inflation could have a substantial impact on how much money you will need to cover expenses over time.
In addition, you will want to figure out where the money you need will come from. As mentioned, Social Security has become a primary source of retirement income for millions of Americans. But other options include 401(k) plans and other fixed-income investments.
Increasingly, another option for many Americans is the reverse mortgage. This is a home mortgage which allows owners over the age of 62 to tap into the equity they have built up in their home without needing to make any payments until the home is sold.
While this sounds like a great option to pay for retirement, it is not always the best fit and the decision to take on a reverse mortgage will depend on the specifics of your financial position.
But let’s assume that you don’t want to rely on just Social Security and reverse mortgages alone. As such, you will need to build up your nest egg to make sure you have enough money for retirement.
Ultimately, the answer to how much you should save will depend on your age and how much you are earning. But the simple answer is that you should be considering saving as much as possible and then save at least 10% more.
Do so will help you to put as much money as possible and as quickly as possible.
Another thing to know is that the so-called 4% rule might not work for most retirees anymore. The rule outlines that you only withdraw 4% of your retirement savings in any given year.
The assumption is that this approach will ensure you have enough money left in the account to take advantage of the appreciation of the remaining assets.
However, this rule becomes less viable the older you get. As such, a better plan might be to look at retirement planning strategies which grow your savings until you reach the age of 75.
This could include part-time work, reinvesting interest and dividends in your savings accounts, and ways to cut expenses. Doing so will help you to ensure that you won’t run out of money when you retire.