According to a recent study from the Transamerica Center for Retirement Studies, baby boomers have a median retirement savings balance of only $147,000.1 While that number may represent a good start, it’s unlikely to be sufficient to fund a long retirement.
Baby boomers face a number of unprecedented retirement challenges. Many don’t have pensions, which means they have to shoulder the burden of funding their expenses in retirement. Retirees also have to contend with a longer life span, which means they need to cover more years of spending. Health care is also a substantial area of expense.
Fortunately, it’s never too late to correct course. With careful planning and quick action, you can retake control of your retirement. Below are three steps you may want to consider. A financial professional can help you analyze your needs and implement the best course of action.
Wait to retire.
One of the most effective ways to catch up on your savings is to delay your retirement date. While you may want to retire in your early or mid-60s, you can benefit greatly by putting retirement off for a few years. You get more time to save money, and you eliminate a few years of spending from your retirement.
If you delay your retirement, you also may be able to wait to file for Social Security. That could lead to an increased benefit. Social Security offers an 8 percent increase in benefits for every year past your full retirement age (FRA) that you wait to file. You can receive the increase fir delaying all the way to age 70, which means you could earn a cumulative 32 percent increase in your Social Security payments.2 That increased income could also help you overcome your savings shortfall.
Contribute more money to your qualified accounts.
An obvious strategy is to increase your annual retirement contributions. Of course, that’s easier said than done. You may feel that you’re already saving as much as possible. If you examine your spending and your budget, however, it’s likely that you may be able to find areas to cut back.
If you are age 50 or older, you can take advantage of catch-up contributions to put more money in your qualified accounts. In 2018 you can contribute as much as $18,500 to your 401(k). However, those age 50 and older can contribute an additional $6,000. Similarly, people age 50 and older can put an additional $1,000 into an IRA, on top of the standard $5,500 limit.
Scale back your retirement spending.
It’s possible that you’re already saving as much as possible and you can’t delay your retirement any further. If so, you may want to cut back on your planned spending in retirement. Think of ways you can reduce your expenses. For example, you could downsize to a more affordable home or move to an area with a lower cost of living.
Also, don’t rule out the possibility of working in retirement. A part-time or seasonal job could give you supplemental income, which could help you minimize your withdrawals from your savings.
Ready to catch up on your retirement planning? Let’s talk about it. Contact us today at Heritage Financial North. We can help you analyze your needs and develop a strategy. Let’s connect soon and start the conversation.
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