Everyone knows you can’t have your cake and eat it too. But when it comes…
If you’re approaching retirement and worried that you don’t have enough saved, you have plenty of company. Financial advisors see clients every day in their fifties and even sixties who have little retirement savings. The median amount of retirement savings of Americans age 55 to 64 is $103,000. A survey by the Center for Retirement Research at Boston University found similar results and concluded, “many Americans need to save more and/or work longer.”
If you find yourself in this situation, here are some suggestions. The first thing to do is to figure out how much you’ll need to retire. This means figuring out how much income you’ll need each month.
Be sure to include all of your expenses. Many people remember the gas and electric bill, but not major repairs to the house, buying a new car, or graduation gifts to their grandchildren. Also include discretionary expenses like cable TV, cell phone plans, and eating out.
Look back at your expenses over the last few months and keep a record of your income and expenses for the next month or two. Look carefully for areas in which you might be able to cut costs. One priority is to pay off high-interest credit card debt.
Also remember the cost of a health insurance plan if you’re not yet eligible for Medicare.
You can also review your Social Security benefits statement. The Social Security Administration mails paper statements at regular intervals and you can also view your statement online. Review your benefits and the Social Security rules to help you decide when to start taking Social Security. Delaying for a few years can significantly increase your benefits.
Next, you should start saving as soon as possible. Every little bit helps. A study found that 65% of workers who make $40,000 to $99,999 annually save less than 5 percent of their income for retirement. Take advantage of any tax deductions or deferments in your IRA and employer matches in your 401(k).
Look for any areas where you can cut back your expenses. Spending on children and grandchildren is a common area. Many people want to do what’s best for their kids, but helping your offspring at the expense of your retirement is a mistake that financial advisors often see. College tuition is a big expense, but there are loans, grants, and financial aid available. You should consider working with your child to come up with a plan to meet part of the costs and have them make up the gap with aid or part-time jobs. Remember that there’s no financial aid available for your retirement.
Finally, if you find your income doesn’t match your projected expenses, you may consider working longer, taking a part-time job, or downscaling your lifestyle in retirement. With discipline and a detailed budget, it is possible to live comfortably for the rest of your life on a modest income.