The greatest surge of Americans turning 65 is less than a year away, and retirement planning is a core area of concern. During Peak 65, more than 10,000 seniors will be turning 65 every day, however 51% of those ages 45-75 don’t believe they have enough saved for retirement to last a lifetime. Whether you have just entered or are approaching retirement, we have put together a few tips to save on expenses and increase your contributions to retirement funds.
Cost Savers in Retirement
Budget
According to the U.S. Bureau of Labor Statistics, a household run by someone 65 or older spends on average $52,141 per year (approximately $4,345 a month). Taking a look at your budget is a great first step to get expenses under control in retirement. Sometimes some reallocation of funds and a few minor adjustments can make all of the difference. Try combing through the past few months of your bank statements and average out monthly expenses, cut unnecessary costs then set categorical limits for spending to make your budget work. Take advantage of some of the best free budget tools to keep you on track.
Explore Renting
In today’s world, renting is everywhere. From renting baby gear to clothes and jewelry, it raises the question what else could you rent to make some extra cash? Consider renting out a room in your home, your boat, car, tools and more. Explore some rental sites or your neighborhood app to see what people are looking for.
Part-Time Work
According to Protected Lifetime Income, 16% of those who retired have returned to work in some capacity. Having some supplemental income can be ideal for keeping busy and simply generating a little bit more cash. Think about starting a small business, driving for delivery services or even securing a remote part-time gig that allows you to have some freedom and earn extra funds.
Catch Up on Retirement Savings
Get Clear on the Details
First and foremost, get clear on how much you need to save for retirement. Use a retirement calculator or the 4% rule to determine your financial needs for retirement. The 4% rule assumes drawing 4% of your investments will cover living costs. For example, if you have saved $2 million, you would live on $80,000 a year. Over the past 50 years, the S&P 500 has averaged a yearly return of about 10.75%, so 4% wouldn’t put a dent in your investment savings.
Health Savings Account (HSA)
Use a Health Savings Account to prep for health costs in retirement. Once you enroll in Medicare at age 65, your HSA investments are still available for use, even if you no longer qualify to contribute to it. Not to mention, once you turn 55, you can contribute an additional $1,000 to your HSA each year on top of the maximum amount using catch up contributions. Use this vehicle as a way to help support any health-related costs in retirement.
Catch-Up Contributions
Once you’ve hit the pedal to the metal on retirement saving, take advantage of catch-up contributions. Currently, those who are 50+ can save extra in their retirement accounts; up to $30,000 in a 401(k) and up to $7,500 in an IRA. Before 50, workers can only contribute $22,500 to 401(k)s and $6,500 to IRAs. The more contributions, the more you close the gap on retirement income.
Meet with a Financial Representative
It’s never too late to start investing. Take into consideration working with a financial professional to find the best way to meet your retirement goals. After working through your investment details, setting up automatic contributions is great way to stay consistent.
For more ways to prepare, take a peek at our article: 4 Ways to Prepare for a Seamless Retirement
Bankers Life is Here
Bankers Life is here to support your retirement journey. We are prepared to answer your questions about retirement and help bring your vision to life.
