Take Steps to Improve Your Financial Retirement
Most baby boomers have less than half the assets they expect to need in retirement.
If you’re nearing retirement and haven’t saved enough money, there may be some things you can do to improve your situation.
First things first. You must determine how much money you’ll need for retirement. According to BTN Research, if you think your retirement will last 20 years, you’ll need to save $196,000 for every $1,000 per month in income. So, if you want $10,000 per month, you must have a lump sum of $1.96 million. If you think you will live 30 years in retirement, then you would need to save $2.69 million to bring in $10,000 per month.
While you might not need $10,000 each month, you will need money for health care expenses, plus housing and food costs. A 2015 annual study by Fidelity Investments on retiree medical costs found that a couple, each 65 years old, and retiring in 2015 could expect to spend $245,000 on health care costs during their retirement, up from $220,000 in the 2014 study.
Inflation is partially to blame for the increasing costs. An inflation rate of three percent cuts purchasing power in half within 24 years; an inflation rate of two percent cuts purchasing power in half within 36 years. If you haven’t talked to your investment advisor recently, call now and find out if any of these investment options would improve your financial future. Keep in mind though, now is not the time to take huge risks. Don’t expect to make up for lost time or money overnight.
Take at Least Some Risk
It always pays off to review your portfolio — particularly if you haven’t made any changes for several years.
To determine whether you need to take more risk, don’t just look at whether the market has been weak or strong recently. Consider instead your needs. Your financial plan should reflect what is important to you, including goals, values and priorities. Once you decide these issues, it’s time for you and your adviser to determine how much risk you should take.
Increase your Stock Allocation
If you retire and spend four percent of your nest egg annually but only earn two percent on the remaining investments, you run the risk of depleting your portfolio. One solution is to increase the portfolio’s stock allocation. Stocks can be volatile, but they also can pay better returns than other investments.
Delay Social Security Payments
You’ll receive larger payments if you don’t start taking Social Security early. According to the Social Security Administration, if you start receiving benefits at age 66 you get 100% of your monthly benefit. You’ll get 108% of the monthly benefit if you wait until age 67; and you’ll get 132% if you wait until age 70.
Keep Working
While it might be fun to think about retiring at age 66, when you can begin receiving full Social Security payments, working until you’re 70 gives you four more years of earnings to invest. And, if you get a part-time job during retirement, that will stretch your retirement savings even further
Cut Expenses
Start cutting expenses now so you can become comfortable with using a more budget- conscious lifestyle. For example, you might want to move into a smaller home, start eating out less often and begin using the many senior discounts that are available to you.
In addition, if you start cutting costs now, you can invest those savings back into your retirement fund.
For more information on ways to improve your retirement outlook, please contact us.
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