6 Late-Stage Retirement Catch-up TipsMarch 25, 2019
Worried about finances in retirement? Studies have shown many Americans are not prioritizing retirement; learn how you can maximize savings for your golden years.
*This blog was originally posted April 18, 2017 but has been updated as of March 21, 2019 for accuracy and comprehensiveness.
Are you approaching retirement age with little savings? You are not alone—studies have shown that many individuals are in danger of financially rocky retirements. There are ways you can minimize this risk; even if you are already at retirement age.
Let’s take a look at some stats (courtesy of the Insured Retirement Institute’s 2018 Baby Boomer Expectations for Retirement)
- The average American needs liquid assets of approximately 11 times his/her salary at retirement age (according to a common ‘rule of thumb’) in order to be comfortable in retirement.
- Only 25% of Baby Boomers (b. 1946-1964) are confident their savings will last throughout retirement
- 4 in 10 Boomers plan to withdraw from their 401(k) as needed to pay for basic expenses but only half (22%) consider their 401(k) a major source of retirement income.
- Monthly guaranteed income is the most important trait Boomers seek in a retirement investment.
- According to a report by Insured Retirement Institute, 42% of ‘baby boomers’ have ZERO retirement savings! 22 percent believe they are doing a good job preparing financially for retirement, versus 41 percent in 2012.
- Only 45% of Boomers expect significant income from an employer-provided pension.
- Only 38 %of Boomers have tried to figure out how much they need to have saved for retirement. Of those, a third did not factor health care costs in their calculations. Another study suggests that healthcare expenses are expected to rise by 5.8% per year through 2022. Medicare only covers 62% of the average American's medical expenses.
- Only 1 in 4 have consulted a financial professional about their situation.
6 Tactics for Retirees
For those approaching retirement planning late, there are steps that can be taken.
- Work longer—most cash-strapped retirement age individuals are planning to do that as they work through the hurdles of a financially stressful retirement. This gives boomers more time to build savings (working longer yields shorter retirement).
- Downsize- While some plan to buy their dream house in retirement, sometimes that is not realistic. If you have a tight budget, consider downsizing—is it just you and your spouse in the house you raised your kids in? Consider it—you’ll reduce your home maintenance and utility costs for years to come if you move into a smaller place.
- Delay claiming social security as long as possible. Those who can wait to claim social security will receive a greater Social Security benefit –there is an 8% increase per year (after age 62) for each year you delay taking Social Security. However, you must start claiming social security once you turn 70.
- Amp up your savings in tax advantaged retirement accounts, including employer-sponsored plans, like 401(k)s and 403(b) accounts.
- Boost your savings rate by reducing spending (use savings to contribute to retirement accounts).
- Reduce debt- Paying more than the minimum on your credit cards, transferring a higher-interest credit card bill to another credit card with a lower interest rate, refinance your mortgage to a lower rate and shorter time period, pay extra principal on your mortgage, etc.
Though it might seem like a hopeless situation, there are ways to get help—Our wealth advisors can provide guidance on your individual circumstances. As the IRI report reveals, “more than eight in ten boomers who have relationships with financial professionals feel better prepared for retirement”.
Contact us for more info.