Behind on your retirement savings? You 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 savings plan, conventional wisdom is to simply save more money. However, that may not be a feasible option. After all, there’s only so much money you can save out of your paycheck. No matter how far behind you are on retirement, you still have to cover current bills and expenses. It may not be possible for you to put more money in a 401(k) or IRA. The good news is there are other ways to overcome a retirement shortfall that don’t include increasing your savings rate. While saving is a critical element to any retirement plan, it’s not the only factor to consider. 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 and a useful financial tool for many Americans. Debt helps you purchase things like a home, business, car, or even an education. You may also have debt related to medical bills or even credit card spending. While debt may be useful in some aspects of life, it can be corrosive and dangerous in retirement. The higher your payments to service your debt, 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. Is work not a part of your retirement plans? Traditionally, retirement marks a transition away from the working world. However, more and more retirees are rethinking what it means to actually retire. Your retirement doesn’t have to mean that you stop working altogether. Rather, it could simply mean that you transition to work that you enjoy or that provides greater flexibility. For example, you could explore a phased retirement with your employer, in which you gradually shift into part-time or consultant status over the course of a few years. You could become a consultant or trainer in your industry, sharing your experience and knowledge. 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, you can increase your benefit amount by waiting to file. 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 up to 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. Plan for taxes. 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. Relocate to 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 Sprouse Financial Group. We can help you analyze your needs and develop a strategy. Let’s connect soon and start the conversation. 1http://www.gallup.com/poll/210890/americans-financial-anxieties-ease-2017.aspx 2https://www.ssa.gov/planners/retire/delayret.html 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. 16766 - 2017/6/20
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