Leaving pension savings is a major concern for many Americans, and the concern is not unfounded. According to a Northwestern Mutual Survey, 21% of Americans have no pension savings at all, and another 10% have less than $ 5,000 saved. For some, it may be possible to get back on track by increasing retirement contributions and looking for ways to increase revenue. But what if you can't do that?
I want to be honest with you: There are no opportunities here that involve making large purchases in retirement and sipping drinks on a beach in a foreign country. But with careful planning, you can stretch your money a little longer than you expected – perhaps far enough to last the rest of your life.
Here are some suggestions.
Opportunities to reduce monthly costs may include cooking at home rather than eating out, reducing a home, or moving to a less expensive city. You can also search for services you can cut or eliminate, such as the unused training membership or excess cellular data you do not use. Every little bit helps. Put this extra money into savings. If you continue this sparse retirement approach, you will be able to make the savings you have lasted a little longer.
Consider Phased Retirement
Phased retirement is where you gradually reduce the number of hours you work with rather than withdrawing at once. This gives you a share of retirement while still earning income, so you don't have to draw on the savings so much in the early years of the pension.
If your job doesn't let you work part-time, try to find one that does. When you are ready to start the transition to retirement, decide how many hours you want to work each week. Once you have an idea of how much you want paid, you can see what percentage of your pension costs will cover, and then decide if it's worth it.
An alternative to phased retirement is to delay the pension by a few years. It will reduce the nest you need to cover the rest of your pension costs. For example, say you planned to retire at 62, and you've decided you need about $ 35,000 a year to cover your living expenses. If you delay your pension to 65, you shave over $ 100,000 of the amount you need for retirement – and earn money during those extra years in the workforce.
Delay Your Social Security Schemes
You can start taking Social Security benefits as early as 62, but to gain full benefit, wait until your full retirement age – somewhere between 66 and 67 for most adults today. You get the best deal if you can delay your benefits to 70 years. At that time you will receive 124% of the scheduled performance per check if your full retirement age is 67 or 132% if your full retirement age is 66.
By delaying your social security benefits as long as you can, you will reduce the personal savings you make need. But do not rely too much on the social security scheme. Its trust boxes will be exhausted by 2034, unless changes are made to the program, and these changes can reduce the value of your social security benefits over time.
Reduce the withdrawal rate
Conventional wisdom says you can comfortably charge 4% of your pension savings each year with confidence that it will make your money last for the past 30 years or more. If you deduct less, your savings will last longer – unless your cost of living in retirement makes this impossible. But if you do what you can to reduce your spending, a lower withdrawal rate can help in two ways.
Firstly, by taking less money from deferred pension account, your taxable income for the year will be lower and you will owe less to the government. Second, it leaves more money in the pension accounts to continue to grow.
You can't help but run out of money in retirement, but by being smart and using one or more of the above strategies, you can make the most of the savings you have.