Behind on your retirement savings? 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 savings, the simple solution is to save more money. 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:
Debt is a natural part of life for many Americans. It can be a useful financial tool for purchasing things like a home, business, car, or even an education. You may also have debt related to medical bills or even credit card spending.
In retirement, though, debt can be corrosive. 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 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.
Delay your Social Security benefit.
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.
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 an affordable location.
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 Thomas Financial Corp. We can help you analyze your needs and develop a strategy. Let’s connect soon and start the conversation.
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