With the average life expectancy increasing every year, our golden years are getting longer and longer. A longer retirement means you need more savings to last you through the end of your life, but with rising inflation and healthcare costs, many seniors simply aren’t able to save enough money to last through retirement.
Perhaps you underestimated your life expectancy. You may have developed health issues that are expensive to treat. It’s possible you simply spent too much early on. Whether you’re concerned about running out of money or you’ve already made a dent in what you have, here are some ways to ensure you have enough retirement savings.
Do I Have Enough To Retire?
If you haven’t started saving for retirement, now is the time to start. Even if retirement is only a few years away for you, aggressively putting away money now can make a big difference in the lifestyle you’re able to live in your retirement years.
401(k)
A 401(k) is an employer-sponsored retirement account that you can deposit part of your paycheck into. Your contributions grow tax-free, and your company will often contribute a matching amount. Consistently putting away money in your 401(k) – and not touching it before retirement – is one of the best ways to maximize your retirement savings. Since a 401(k) grows over time, the earlier you start one, the more your savings will increase.
IRA
An alternative to a 401(k) is an IRA, or individual retirement account, which is set up by an individual rather than an employer and is tax-deferred. An IRA has a lower annual contribution limit and offers more investment options. If you’d like to set up both, you don’t need to choose between a 401(k) and an IRA. Many people choose to max out their employer match and put the rest in an IRA.
The 4% Rule
The 4% rule refers to the popular guideline that retirees should plan to spend around 4% of their wealth annually. Knowing what that number is for you can help you work backwards to strategize about what’s sustainable for you and your savings. Remember that 4% is only accurate for the first year. You must adjust for inflation for each of the following years.
What To Do if You’re Running Out of Money?
Let’s say you’ve already retired and your money from retirement is running seriously low. These are some options you can take to ensure you’re able to maintain your current lifestyle without outliving your retirement savings:
Work Longer
One simple way to prevent outliving your retirement savings is to continue working past age 65 or pick up another part-time job if you’ve already retired. Even working for three to six extra months at the end of your career can boost your retirement savings rate by an entire percentage point. Working longer not only offers financial benefits, but it’s shown to boost mental health, social connections and physical health in seniors. If you’ve been in the same job for decades, you could consider a new career path in retirement or decrease your hours in the same role. However you decide to continue your employment can delay your retirement enough to help you save up some extra money.
Delay Taking Your Social Security Benefits
You can file for Social Security benefits as early as age 62, but if you don’t need them right away, delaying the start can offer a big financial boost. Each year you hold off starting your Social Security benefits up to the maximum age of 70 adds an 8% credit per year to your future monthly payout. If you wait the full eight years, you could end up earning hundreds of dollars extra each month, which can significantly impact the lifestyle you’re able to lead in retirement.
Consult With a Professional
Your retirement savings and goals are highly personal, which is why having the expertise of a financial advisor can be worth the cost. A professional can offer specific advice and help you navigate tax rules about money from retirement.
Cash Out Your Life Insurance Policy
Life insurance policies that carry cash value, such as whole life insurance, can be cashed out and used for income. This should only be used as a last resort, because cash-value withdrawals can carry consequences like high taxation and a reduction in your death benefit.
If you don’t have life insurance yet, Americo Senior Life can help. We offer affordable, flexible life insurance coverage options that in most cases don’t require a medical exam or lengthy application process. Contact us today and an Americo Senior Life representative will be happy to answer your questions and get you started on the path to insurance security.