It’s never too soon — or too late — to plan for retirement and to take positive steps for saving money
More than three out of five 65-year-olds are expected to reach age 80, according to the Social Security Administration — an increase of almost 50 percent from 50 years ago. While that’s great news, think about what that means to your retirement saving. If you retire at age 65 and live to be 80, you will spend 15 years in retirement. If you live to age 100, you will be retired for 35 years.
The good news is that it’s never too soon — or too late — to plan for retirement and to take positive steps to saving the amount of money you will need for retirement. Here are several steps you can take now beyond the simple “just save more” game plan.
Determine Your Budget – You may be years from retirement, but you should determine now how much you’ll need. Track your spending and figure out which expenses you won’t have when you stop working and which expenses may increase. This will help you decide whether your present investments are enough to cover your future needs. If not, make adjustments immediately. Work with a financial planner if you think you need assistance.
Get rid of high-interest debt – Some of the highest interest rates you’ll pay are for credit card debt, and the Employee Benefit Research Institute reports that nearly 50 percent of seniors aged 75 and older have outstanding debt — mostly from credit cards. Many credit card companies charge their clients 20 to 25 percent interest. If you had $20,000 in debt, you’d pay $4,000 to $5,000 annually — just for interest — before even paying any of the balance. Don’t go into retirement with that debt. Pay off the debt now, and then use the funds you had to put toward your credit card debt into saving for retirement.
Shop for the Lowest Fees – You will be charged a fee for having someone manage and invest your money. That’s fair — you’re paying for their expertise. Just make sure that you’re not paying more than necessary to your banks, brokerages, and credit card and mutual fund companies.
For instance, one company might charge 1.18 percent for managing your mutual funds, while another company might charge 0.10 percent for the same service. When added up, you could save several thousand dollars over several years. However, make sure that you’re getting the services you need. Sometimes a higher fee is worth the attention and service you need.
Plan to Pay Off Your Mortgage – Even if you have a low interest rate on your mortgage, it’s still a good idea to pay off your house. You still will have home-related expenses, including property taxes, insurance, maintenance and repairs, but your mortgage will be one less expense to worry about.
Some retirees go with a reverse mortgage when they have a lot of equity in their homes. The reverse mortgage lender provides the home owner with a steady income. The loan doesn’t have to be paid back until the homeowner moves out or dies. If you have heirs, they may have to sell the home unless they can afford to pay off the loan.
Consider a Change of Scenery – Use your vacation time to check out great retirement cities. Not only can you look for places that match your interests, but you might find places that allow your retirement dollars and the equity from the sale of your home to go farther.
USA Today in 2018 ranked the top 30 cities for retirees, taking into account the prevalence of recreational facilities, access to medical facilities and the amount of income a retiree would need. Rochester, Minn., was ranked number one, with an average retirement income of $26,217.
Don’t Serve as a Bank for Your Adult Children – According to a survey by Merrill Lynch and Age Wave, four out of five parents offer financial support to their adult children. And a TD Ameritrade survey discovered that many millennial receive about $11,000 annually from their parents. That same money invested annually at 8 percent could be a boon to your retirement savings.
Please contact us for help planning for retirement.