Finance, Looks

Retirement – It’s Not always Black and White

The older I get, the more I think about the idea of retirement. I mean, it’s completely logical. A lot of my business involves helping clients prepare for it.

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Most people plan to stop working at some point. Some have a specific date in mind, others are planning for a particular event. Usually that event is the day we think we can afford to live off our investments.

If you’re in midlife, like me, you may be concerned about whether or not you’ve saved enough money to retire.  It’s a valid concern.  Synchrony Bank notes that Americans in their 50s should have 6-7 times their annual salary saved for retirement, but the average savings of that age group is only $117,000.  If you figure you’re going to withdraw about 4% of your account value each year, at that amount you’re looking at income of just a less than five grand annually.  I don’t know about you, but I’d have to do some serious belt-tightening to make that work!

What do you do if you haven’t saved enough? If you’re not already maximizing your retirement savings deferral, including the “catch-up” savings allowed for those of us over 50, try working your way to it.  The sooner you can get to that max, the better.  You’ll save income taxes now and supercharge your retirement savings.  Remember, we’re shooting for that goal of creating a retirement account worth 6-7 times our annual salary.  The combination of money we add and investment growth will help us get there.

Your salary deferral is the amount you have deducted from your paycheck to go into your retirement account.  In most cases your employer will match a portion of what you put in, so you’re getting a great return on your investment right out of the gate.  But that’s just a start.  You can defer up to $25,000 a year if you’re over 50 and your employer offers a 401(k).  If your employer plan is a SIMPLE IRA you can put in $16,000. 

If your saving rate is nowhere near those amounts, try increasing a little every time your employer’s plan allows it.  Maybe start with an extra $50 or $100 per paycheck.  You’ll be surprised how quickly you get used to putting away a little more and bringing home a little less.

Easily said, but not so easily done.  If you could save that much money each year, you probably would have done that all along, right?  So, what other options are there?

Well, how about delaying your retirement?  Now, before you balk at that, hear me out!  Each year you continue to work, you experience several benefits.  First, if you aren’t retired, you aren’t drawing your retirement funds.  Remember, you’re not required to pull money from retirement accounts until you’re 70 ½.  And if you work past 70 ½, you can still put money in even though you have to take money out!  It’s weird but it’s true!

The longer you wait to pull retirement funds, the more you’ll have when you do retire.  In those extra working years your money continues to grow and you can continue adding to it for even greater growth!

Even with my compelling argument for continuing to work you may be a little skeptical. Never fear – I’m not finished yet!  Another benefit of staying in the workforce – you’re keeping your mind and body active.  The daily challenges of your work environment and socializing with colleagues keeps you sharp and focused.

Still not convinced?  How about the health insurance savings?  If your employer offers health insurance, you can receive that benefit without paying for it, or paying for it at a substantially cheaper rate than if you purchased your own individual policy.  That’s huge!  Ask most retirees and they’ll tell you the cost of supplemental Medicare insurance was much greater than they anticipated.  How much better to have your employer pay for it!!

I hope I’ve given you hope if your finances aren’t where you’d hoped they be. 🙂 There are options, and they don’t have to include fasting as a budgetary rather than dietary choice.

To Your Better Wealth,

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