Do you have a retirement savings gap? While you may be feeling some stress about your retirement outlook, you certainly aren’t alone. According to Gallup’s 2017 study of financial concerns, more than half of all Americans are worried about their ability to pay for retirement.1
If you’re behind on your retirement planning, the simple solution is usually to save more money. Conventional wisdom is to increase your contributions to your 401(k) or IRA. However, that may not be possible. After all, there’s only so much money you can put away for the future. You still have to cover current bills and expenses.
The good news is there are other ways to overcome a retirement shortfall besides saving more money. While saving is a critical element, it’s not the only strategy you can use. Below are five strategies to shore up your retirement outlook that don’t require you to increase your savings:
Tackle your debt.
Debt is a natural part of life for many Americans, and it can be a useful financial tool for purchasing things like a home, business, car, or even an education. You could have debt related to medical bills or even credit card spending.
Debt can be corrosive to your financial stability in retirement, though. The higher your debt payments, the less income you will have leftover to pay other bills and support your lifestyle. You may be forced to take higher distributions from your retirement savings to make your debt payments. Those higher withdrawals could cause you to drain your assets early.
Look for creative ways to eliminate your debt. For instance, you could transfer high-interest debt to a vehicle with a lower interest rate so you can pay off the balance faster. You could also try negotiating with credit card companies to lower your rate. Again, a lower rate could help you pay down the balance faster.
Work in retirement.
Work and retirement don’t usually go hand-in-hand. After all, retirement is when you stop working. However, there could be flexible work options available that allow you to generate income while still retaining some schedule flexibility.
For instance, you could explore a phased retirement with your employer, in which you gradually shift into part-time status over the course of a few years. You could become a consultant or trainer in your industry. You could work part-time in an area that interests you, like golf, gardening, or more. Be creative and look for opportunities to use your skills and talents.
Wait to file for Social Security.
You can become eligible to file for Social Security at age 62. However, there’s benefit to waiting as long as possible before you start receiving payments. If you wait beyond your full retirement age (FRA), which is likely 66 or 67, Social Security will increase your benefit. You get an 8 percent credit for every year that you wait to file past your FRA. The credit stops at age 70.2
While it may be tempting to file as soon as possible, look for ways to delay. That way, when you finally do start benefits, you’ll get as much money as possible. The increased income could offset your savings shortfall.
Develop a tax strategy.
Taxes don’t stop just because you stop working. You could face taxes on all forms of retirement income, including pensions, retirement account distributions, and even your Social Security benefits.
You could reduce your income need by minimizing your tax liability. For example, you could consider using a Roth IRA to generate tax-free income. Or you could structure your distributions from your various accounts in a way that minimizes your taxes each year. A financial professional can help you develop a strategy.
Reduce your cost of living.
Perhaps you have a retirement shortfall because your cost of living is high in your current location. You may be able to reduce your spending needs by relocating somewhere less expensive.
For example, if you live in the city, you might consider downsizing to a smaller home in an affordable suburb. Or maybe even moving to a more affordable part of the country. Some retirees are even moving to other countries to take advantage of lower medical costs.
Ready to tackle you retirement shortfall? Let’s talk about it. Contact us at Gregory Financial Group. We can help you analyze your needs and develop a strategy. Let’s connect soon and start the conversation.
Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice.
The material is not intended to be legal or tax advice. The insurance agent can provide information, but not advice related to social security benefits. Clients should seek guidance from the Social Security Administration regarding their particular situation. The insurance agent may be able to identify potential retirement income gaps and may introduce insurance products, such as an annuity, as a potential solution. Social Security benefit payout rates can and will change at the sole discretion of the Social Security Administration. For more information, please consult a local Social Security Administration office, or visit www.ssa.gov
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