Planning for retirement is a constant struggle. Few employers offer pension plans today. And let’s face it, how many people work for one employer for 30 years anymore? In the past people had just one job but now there are multiple career changes during a person’s lifetime. Then there is social security and even the government expects the program to run out of money in the future. The problem is even bigger than you think as many people are living into their well into their 80’s as life expectancy has skyrocketed compared to when 65 was nearing the end of life.
Planning your retirement means that you need to ensure future revenue not for 10 or 15 years, but in some instances as long as 25 years or more into the future. This is a very tall order as you need to prepare ample funds for food, housing, medical expenses, even for travel. With that in mind, here are five ways to ensure you have enough money for retirement.
- Work Longer
In 2013, Wells Fargo published a study which found that 37% of people working today never expect to retire. For some, they enjoy working and never want to stop. For others, they need to work.
Regardless of where you stand, the fact is that more people are working later into their life. Actually, this is a good thing as it allows the opportunity to transfer a life’s worth of knowledge to a younger generation. It also means that you can maximize your earnings for a little bit longer. Even if it is just a couple of years every penny adds up. So if you can extend your retirement past 65, or even to 70, and you love what you are doing. Then go for it!
- Delay Applying for Social Security
Depending on the year you were born you will either become eligible for social security when you turn 66 or 67. However, there is no law that says you have to begin collecting Social Security on your birthday. You’ve been paying into the fund for your entire working life. Delaying payments until your 70th birthday can mean a more than 30% increase in the size of your monthly checks.
You need to weigh the pros and the cons of this approach. Some people can afford to wait. While others need the money just to survive.
- Consider a Reverse Mortgage
What’s a reverse mortgage? It’s a loan which allows Americans over 62 to tap into the equity they have built up in their homes. Unlike a traditional mortgage, there are no monthly payments. All you need to do is pay the insurance, taxes, and utilities for your home. The mortgages have been around since the 1960’s and have become increasingly popular in recent years.
This is a good way to ensure your post-retirement income, and you can use the money to pay for a number uses. You can even keep the funds in a special account for emergencies. You can calculate your reverse mortgage loan here. This will give you an idea of home much money you will get.
- Manage Fixed Expenses
As you get older your lifestyle will change but you still want to enjoy many of the same activities as before. But you are probably not going to buy a new car as often, and hopefully, your kids have already finished college. What this means is that is it much easier to identify and manage your fixed expenses.
Once you know what your fixed expenses will be, then you want to ensure you have a revenue stream to cover these expenses. As mentioned, you probably don’t have a pension but collecting social security is a good alternative. If you can keep your fixed expenses to less than 80% of the monthly benefit, then you will have some extra money to enjoy life and you won’t need to tap into the other retirement funds you have set aside.
- Reduce Risk & Leave Your Retirement Fund Alone
If you are retiring today, then you have seen some of the most turbulent times in America’s economic history. This all led us to a time where returns on investments are few and far between. Unfortunately, many people use this to justify taking on riskier and riskier positions in the portfolio. However, this is the exact opposite of what you should do when you are in retirement.
Look for investments with a good dividend or return without the risk. One example is investing in Federally Guaranteed Municipal Bonds. While these bonds are not without any risk, your principal is protected. Depending on how much money you can invest you can even live off the interest payments or leave the fund alone and let it grow.