If you are nearing retirement and don’t have much saved to your retirement nest, then you are not alone. Over 45% of baby boomers have the same fear of running out of money during retirement, according to the 20th Annual Retirement Survey of Workers by Transamerica Center for Retirement Studies. The survey also found that Baby Boomers have an estimated median retirement savings of $144,000 for household expenses, and less than 50% have saved up to $250,000.
If you are in this position, then these five tips will help you improve your long-term saving goals in the shortest time.
1. Estimate Your Retirement Savings and Income
The report showed that 44% of baby boomers guessed how much they needed to save for retirement instead of calculating it. The first step to properly planning your retirement is figuring how much you need to save to live comfortably in retirement based on your lifestyle.
You can base your calculations on your current living expenses or use a retirement calculator. Alternatively, you can use budgeting apps like Personal Capital to know how ready you are for retirement.
2. Remain Relevant in the Employment Market
According to the report, about 65% of baby boomers plan to remain employed after age 65. Only a few are proactive and have taken the necessary steps to ensure they can continue working. For instance, only about 40% said they had updated their skills to remain relevant.
While retirement is an official end to your working career, you may still find additional income sources in retirement using your skills. Updating your skills makes you sought after and aware of industry changes.
Most households may not meet the suggested financial targets, so their best option is to keep working as long as possible. Think of it as phased retirement. Instead of quitting work altogether, you can do a part-time job depending on your health and skills, as well as your passion.
You can also remain engaged with your current employer but move to a position with a more flexible schedule and reduced workload.
3. Have a Retirement Strategy
As you calculate your retirement expenses, have a bigger picture of what your overall lifestyle will look like in retirement. You should factor in your expected retirement age, income sources, living expenses, savings and investments, government benefits, inflation, longevity, and long-term care.
Also, consider the role your available assets play in your retirement plan. It’s important to note that your house’s equity is a retirement asset if you have one. You can access that equity by selling your current home for a smaller house or taking a reverse mortgage.
4. Take advantage of incentives to save more
Depending on your credit history, you may be eligible for certain tax incentives like the saver’s credit or catch-up contributions.
- Saver’s credit: this is a tax credit for eligible taxpayers saving to a 401(k), 403(b) or similar plan. You qualify if you are aged 18 and above, not a student, and not claimed as a dependent to another person. The amount of credit is based on your adjusted gross income, as reported on your Form 1040. It can be 10%, 20%, or 50% of your contribution.
- Catch-up contributions: If you are aged 50 and above, you qualify to contribute an additional amount to your retirement account above the IRA contribution limit. You can contribute up to $6,500 if eligible.
5. Talk to a Financial Advisor
Financial planning can be tricky, especially if you start late. According to the report, over 45% of baby boomers rely on financial advisors to help them navigate their retirement planning. They will answer any questions you have and offer professional recommendations regarding savings and investing.
Conclusively, planning retirement is a daunting task, regardless of how far retirement is. It’s essential to be proactive and plan out your future now to avoid the stress associated with late retirement planning. The sooner you get started, the better the position you will find yourself in in the future.
