Editorial staff
How much money do you think you'll need to retire? You might be shocked that experts recommend that each individual's retirement savings should be between 1.26 million and 3 million or more.
The amount you'll need to retire and live comfortably depends on your current lifestyle, your location, and your goals. By understanding these factors and planning early, you can take control of your future.
Factors such as traveling, taking up new hobbies, relocating, healthcare, etc., can add up over time. According to Investopedia, a common rule of thumb is to aim to have 10 to 12 times your pre-retirement income saved between the ages of 60 and 67. This will allow you to maintain your current quality of life and cover living expenses moving forward.
But what if you don't have that kind of money? What if your finances are stretched so thin that there is not enough money to survive today, never mind when you retire?
Many people work way past their retirement age and on through to the 80s and 90s, not because they want to but simply because they couldn't afford to live if they did retire.
According to Gallup, around 40% of Americans do not have retirement funds.
While experts suggest making a savings plan, creating an emergency fund, and starting small before opening an IRA if you do not have a company-sponsored 401 (k), that isn't possible for everyone, and even putting small amounts of money aside can plunge you into financial difficulties right now.
If you fall into the latter group rather than the former group and have been able to put away money toward retirement, or you aren't sure you will have enough money for your retirement, what exactly are your options once it's time to retire?
Equity Release
Equity release or reverse mortgage solutions free up some of the money from your home to use now. If you own your own property and are over 55, you might be able to get a reverse mortgage on your property.
How it works is that a sum of money is lent to you as in a mortgage, but you don't pay it back until you either sell the property or die. The lending company is then repaid from your property sale or estate. While this might seem like a viable way to raise retirement funds, especially if you have a property that is worth a substantial sum, it does have drawbacks, so it's worth getting independent advice prior to moving forward with this option to assess if you are suitable and qualify for this option and what it means to take out a reverse mortgage.
Cut Costs
This is something you can do at any age, not just in preparation for post-retirement.
Take stock of your income and outgoings, as well as your debt levels, and ensure that you aren't paying out too much. Paying down debt is a good course of action prior to retirement, especially if you don't have much in the way of retirement funds to access if any at all.
Look at your lifestyle. What is essential, and what can you do without if you need to? Cutting costs now can prepare you for a more frugal way of life and eliminate excessive costs once you retire.
Work Longer
Sadly, for many people, retirement age comes and goes as another year on the calendar, and they simply continue as they did before. While they will be entitled to some social security benefits, this might not be enough to cover their expenses.
This requires many people to continue working past retirement age so they can afford to live.
You might want to stay in your current role with your current work schedule or hours, or you might want to reduce work hours or change careers for something more suitable for your general health status. But not stopping work is something many people do. In fact, the over-75s are the fastest-growing age group in the workforce, according to the Pew Research Centre, with the figures quadrupling since 1964.
Other studies show that nearly 20% of the workforce is over 65, so if you're physically able to continue working, it could be a viable option for you.
Catch Up Contributions
Did you know there is a scheme called Catch-up Contributions? This scheme allows workers over 50 to contribute to a qualified plan over the standard allowance or IRA limit of contributions. If you qualify, you can make a catch-up contribution of up to $6,500. This means that if you're over 50 and have a 401 (k) or IRA, you can contribute more than the standard limit, which can help you catch up on your retirement savings if you're behind.
Social Security
To access Social Security once you retire, you need to have accumulated at least 40 credits, which can take around 10 years. You will qualify if you have little income or resources, a disability or blindness, or are in your 60s.
However, there are many variables that determine how much you will get. Your income, living situation, and what you own all play a part, among other factors.
While this can be a helping hand in retirement age, it might not be enough to live on, but it can help you reduce hours in your workplace, for example. On top of this, you might be eligible for other benefits, including SNAP and Medicaid.
You can also delay the start of your Social Security benefits to maximize your income when you need it.
Downsize
While we discussed cutting costs associated with your lifestyle, now might be the perfect time to downsize your home. Whether you're moving to a smaller rented accommodation or selling up and moving to a smaller home, downsizing often involves lowering many costs, including mortgage payments, if applicable, taxes, utility bills, and more.
Alternatively, you can take in a lodger if you have the room and don't want to downsize to help you build up money for a nest egg for retirement.
Editorial staff
