Sunday, September 29, 2013

One Minute to Midnight Retirement Planning

retirement (Photo credit: 401(K) 2013)
A mixture of personal circumstances, economic uncertainty and bad luck can leave people approaching retirement with insufficient savings. If you find yourself in this position you have a few options to maximize your savings.

Increase Savings

If at all possible, increase the amount you’re saving. Standard financial lore says to save at least 15 percent of your income for retirement. Try to increase this even more.

Once you’re past 50 the Internal Revenue Service allows you to contribute more to IRAs and 401(k)s. Take full advantages of this opportunity.

Cut Back

Increasing savings, by necessity, usually means cutting back on living expenses. You may need to cancel expensive vacations or purchases in the last years before retirement. Moving to a smaller, less expensive home can free up equity which you can roll into IRAs, 401(k)s or investments.

Add Some Risk (Or Play it Safe)

Depending on which financial advisor you ask, someone playing catch-up on retirement savings should either play it extremely safe or learn to take some risks. The right decision depends on your saving habits and personal preferences.

Highly conservative savers may not see the returns they require to retire comfortably. This is especially true for people whose savings focus on CDs and money market accounts. Adding some risk to a conservative portfolio, such as increasing corporate bonds and stock portfolios, could increase your returns.

On the other hand, we’re talking about a situation where you already lack the funds you need, and increased risk carries with it the possibility of increases loss as well as profit. If you’re not comfortable risking the savings you have, risky last-minute investments are not for you. 

Use Benefits While You Have Them

If you have medical conditions that require attention, take full advantage of any benefits your employee offers. Whether you need surgery, dental work or even access to addiction rehab centers, use your health coverage before you retire.

Using your health benefits before retiring can have a significant impact on how long retirement savings last. The healthier you are, the less money you’ll spend on medical expenses. In other words, taking the time to lose a few pounds now could save you dollars in the years to come. 

Delaying Retirement

If your retirement savings are particularly low, you have another option: delay your retirement. By working an extra five years or so you increase your eventual Social Security income and may be able to take greater advantage of the IRS over-50 programs. Talk to a financial advisor to see how this option would impact your personal finance.

Many retirees now chose a “working retirement,” either out of necessity or the desire to explore a new career they truly enjoy. Some see part-time employment as vital to their retirement income, while others see the job as more of a hobby that gets them out of the house and provides social interaction.

A part-time job won’t bring in the income you’re used to, but it’s not supposed to replace your old employment. Instead, part-time employment helps you stretch your retirement income further. For many retirees whom need supplemental income, a part-time job makes a significant difference.

1 comment:

  1. Cutting back is definitely a big part if retirement savings is coming up short. My in-laws just realized that they could retire right now if they lived on $3000 or less a month, so they cut back on stuff.


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