Some Tips on How to Not Run Out of Money During Retirement

 

 

Many people have a fear they will run out of money during retirement, and when that happens they’ll be unable to make any source of income to keep them afloat. This is a very real fear, and it does happen. But there are many ways you can help to fight against this possible. Today we have some solid tips on how to not run out of money during your retirement years.

 

The 4% Rule

This rule refers to only using four percent of your retirement savings value at the beginning of retirement. Then, as the years pass by, you adjust that amount based on the new year’s inflation. This will help your savings to last about 30 years, which should do well for most people’s retirement. For example, if you manage to save $10,000 you would withdraw $400 a year to live off on top of any income sources you have like social security or a pension. If you manage to save $100,000, you would withdraw $4,000.

 

Investments

You’ll want to take some of your savings and put them into investments that will slowly make you money as your retirement progresses. A mix of stocks and bonds, preferably halved, is a good plan. Another idea is to invest savings into a profitable local business where you’re a silent partner, thus accruing income without having to do anything. The last plan is only feasible for those with a decent amount of savings to begin with, however. One idea many people have begun looking into is real estate. This is something you’d want to begin pursuing pre-retirement. With the purchase of one or two moderately priced rental units, you could generate a small but steady income for an indefinite amount of time.

 

Be Flexible

Remember that the key to financial security is flexibility and diversity. Don’t put all your money into one thing and have a backup plan should something happen to a portion of your retirement income. Perhaps one year your stocks build a lot of value which can be used while your nest egg sits untouched. Or maybe you need a little extra from your nest egg during a year where a business you invested in doesn’t generate as much income. Always be ready to switch up the plan just a little.

 

Think About Work

If you are retiring in relatively good health, you may want to think about working. While this seems totally against what retirement is about there are many different options. This also helps give you something to do. Options to investigate include freelance work, where you work from your home, an easy part-time job, or even consulting work.

Before getting a job or earning extra income, however, check with current social security limits. While retirees can work for supplemental income, it is limited to a certain amount before you become ineligible to receive your SSI payments. This amount varies each year, and might change based upon your state.

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Most People Don’t Have A Clue How Much They Really Need to Retire

 

 

When asked how much money they need to retire on, many people don’t have a clue. Those who think they have some idea are typically way off the mark. A recent Bankrate survey showed that over sixty percent of Americans answered they had no idea how much was needed to retire.

Of the people who did supply an estimate, they guessed around $650,000. The issue? These people are counting on a certain amount to roll in from Social Security payments – but that rate can change, and it – in all honesty – can’t be lived off without another source of income.

This same survey saw that almost half of people between the ages of 18 and 29 had no retirement savings, nor any solid plan as to how or when they will begin saving for life after work. This is a big issue, because saving enough to live comfortably in retirement requires planning early on – unless, of course, someone ends up getting lucky with a six-digit income every year between 35 and 65, while maintain a five-digit budget. That, of course, rarely – if ever – occurs.

 

What Is the Problem?

The problem isn’t just an economy only now on the rise after a big down slope. A survey by the Federal Reserve showed that barely half of all participants could answer five simple financial literacy questions correctly. With this, a correlation appeared between those who scored poorly and those who felt unconfident about their retirement prospects.

The problem is that there is no one valuable way to find advice on financial questions – nor any guide on how to properly save for retirement. The survey answers varied between actual financial advisors, family members, friends, online sources (such as calculators), and financial institutions like banks or credit unions. A substantial portion of people don’t go anywhere for guidance, and simply try to figure things out for themselves.

The other issue lies within the Social Security system. Many feel pessimistic over the future of the program, while others are relying too heavily on it for retirement. The truth? Approximately half of people currently in retirement depend on their monthly SSI checks for half or more of their retirement income.

 

What You Can Do

So how can you ensure you do your best to create a comfortable or at least livable retirement? The key is to start saving now, no matter your age. You should be placing about ten percent of your total income into a retirement account if you get an employer match. If not, aim for a minimum of fifteen percent. For couples, this is for each person’s income, which means couples would total twenty to thirty percent of their combined income in savings each pay period.

The more you can save, the better. At a minimum, you should have enough to cover your most basic living expenses for thirty years. This would allow you (and your spouse) to both meet your bills and use a small amount of money to enjoy yourself after work ends.

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How A Side Job Can Help You Save For Retirement

 

 

If you’re getting near retirement, or simply planning, a side job may be just what you need to meet your financial goals. But we aren’t talking about taking on a part-time job at your local diner or grocery store. What many people have chosen to do as a side job is freelance work. In fact, recent estimates by Intuit have reported that as many as forty percent of the working population will work as a freelance in some form by the year 2020.

 

Why Freelancing?

In years past, freelancing was about being one’s own boss – but that just isn’t the only consideration modernly. Freelancing has many benefits and is increasingly being used by individuals with regular salaried jobs to earn a little extra cash. Just a few of the benefits of doing freelance work out of your own home include:

  • Being able to work more or less on your own schedule
  • Creating an additional income that does not pull you away from your home 20-40 hours a week
  • Bringing in extra cash that can range from pocket money to considerable bank
  • Most people take on freelancing jobs that they ENJOY – which makes it seem less like work than a typical nine to five does
  • If you are already living off your normal income, all of the money made through freelancing can be tucked away for retirement – or, 80% at a minimum

Single income families with difficulties saving for retirement can now rely on two incomes, with the person at home raising children able to work a few hours a week to make money – without ever leaving the home. This is a total game changer for many families looking towards retirement.

But the best part is that a side job freelancing can significantly increase your nest egg – even for those within five to ten years of retirement who realize they haven’t saved enough. By bringing in just $50 each week that can be placed into retirement savings, a side job can increase your nest egg by $13,000 to $26,000 in a relatively brief period. That’s one person alone. This number can be significantly increased if two people get side jobs, or the person freelances a longer length of time, or works to make more than an average of $50 weekly.

 

It Doesn’t Need to Stop, Either

When a person retires from their full-time career (hopefully with a pension and/or social security), they can continue working their side job. There are income limits as to how much you can make to supplement your social security, but this isn’t usually an issue.

In fact, recent surveys show that many people who pick up their side jobs late in retirement plan on continuing to work them once they retire. Some plan on working less, but many agree this can fulfill several needs in one – primarily additional income, and something to fill many free hours no longer taken up by the normal work day.

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Can You Be This Happy in Retirement?

 

A documentary has recently been released by the New York Times which shoes us the life of Mario Salcedo. Salcedo has been privileged enough to spend the last 21 or so years living on a cruise ship without interruption. This is how he has chosen to spend his retirement, and states that he’s the happiest man in the world.

Most people, however, have looked at the documentary and immediately called it, well, crap. It simply isn’t possible to have a retirement like that unless you’re absolutely rolling in money. Today we’re going to look at that and find out: can you be as happy as Mario Salcedo in your own retirement?

What many fails to realize is that the key to Salcedo’s great retirement isn’t that he’s rich beyond belief. He continued working into his retirement, and in fact, works for five hours a day as an investment manager online. Working is a part of modern retirement that didn’t exist in previous generation.

The title of the New York Times piece presents us with the claim (one made frequently by Mario himself) that its subject is “the happiest guy in the world”—a challenge to the viewer if there ever was one.

Retirement has been defined by several clichés that not only provide unrealistic expectations but provide a limiting mindset to those heading towards that stage of their life. For example, most brochures tout endless activities that make retirement look like a permanent vacation. It is not. In fact, it is anything but.

The big issue here is that people are only presented with the stories of successful retirees who move to Florida to spend the rest of their day splaying golf, lounging at the beach, and having brunch with friends – or live on a cruise ship. The other side of the coin is not so pretty. It is filled with poverty, inability to afford medications, and plain misery. These stories don’t get told, and, unfortunately, there are more of these than there are of happy retirement vacationers.

To be as happy as the Salcedo you need two things: finances, and a definitive plan for what you want to do with your life after work.

For the finances, it takes a lot of saving, investing, and challenging work. The earlier you can begin planning for your retirement, the better. In fact, the people who get to enjoy their retirement were wise enough to begin saving in their twenties and thirties. It also takes belief that you will one day be doing whatever it is you’d love to do in retirement.  

Yet the retirement plan, or the retirement story, is not well talked about and equally important. Even those who make it to the finish line with ample finances find they simply don’t know what to do with themselves. A job defines most people’s lives, and they simply aren’t prepared to cope with all the free time given them in retirement.

So, if you want to be happy in retirement, you need to figure out what it is will make life fulfilling after work ends. Find what you love to do, and plan for it. Plan for your social needs, also. If you do that, retirement can be a rewarding experience.

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How to Stay Active During Retirement

 

There are many old sayings which state you only get older when you stop moving. While this may not be entirely accurate, it has been proven that senior citizens who stay active in retirement tend to live longer, more fulfilling lives than those who simply stop moving altogether.

But how do you stay active during retirement? It isn’t necessary to start training for the Olympics, or even start pulling out the bench weights. The idea is to have purpose, get moving, and generally create a fulfilling life for yourself now your workforce days are over.

 

Get A Dog

If you don’t already have one, it is highly suggested you get a dog if allowed. A dog will fulfill numerous needs in one, but the key one here is that you must walk and play with them. This will help keep you active. As a bonus, dogs also provide valuable companionship for seniors who live alone – or even senior couples living together. Even better is they provide a small level of protection against home intruders.

Create A Weekly Lunch Group

Finding time to socialize after retirement is vital for both the purpose of staying active, and for keeping optimal mental health. One of the leading mental strains on seniors is lack of socialization. Combat this by creating a weekly lunch group with old friends or family. This will ensure you get out of the house at least once a week and will give you something to look forward to.

Join A Gym

Some seniors may still have the health necessary to hit the cardio equipment or lift weights. Yet even those who do not could benefit from a gym. The key here is to find one that offers low-impact exercises. One fitting example is water aerobics, which allows you to keep muscles healthy without placing unnecessary weight on your joints. Group exercises also allows you the opportunity to meet new people.

Volunteer or Work

Social security allows individuals to work a certain number of hours per week if healthy enough to supplement their income. You’ll want to check current laws and standards, but the hours will typically amount to only one or two days a week. This could serve the dual purpose of padding your pockets and keeping you active.

Or maybe you’re done with working, and would rather dedicate your life to helping others instead? Try volunteering. There are many nonprofit organizations or even individual people within your community who would greatly benefit from your help. You could offer free (or cheap) babysitting to a neighbor or lend your superb kitchen skills to a soup kitchen.

Conclusion

Staying active during retirement is vital to your overall health. The examples listed above are prime examples on how to do just that. But don’t feel limited to these examples. Every person is different, and there may be something else which helps you to keep moving. As long as your health and mobility allows for it, nothing is off limits!

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When Thinking About Healthcare in Retirement, now is The Time To Save

 

 

Retirement is supposed to be a time of relaxation and enjoyment, mostly devoid of the stressors of working life. With a freer schedule, people can do all those things they wanted to. Unfortunately, retired life ends up a lot more stressful for many, due to one crucial factor: healthcare.

The ever-rising costs of healthcare has shown a continuing trend as one of the largest expenses post-retirement. The sad reality is that some retirees end up paying more for their healthcare expenses – between visits, premiums, and prescriptions – than they do for their rent or mortgage.

Contributing highly to this disastrously growing trend is that access to health insurance sponsored by a previous employer or union is almost unheard of upon retirement. In the past, these options were available, at a minimum, to those who retired from a company with a specific number of years invested.

If you’re one of the millions of potential retirees who will be on their own come time to leave the workforce, you need to think now about ensuring adequate coverage. Most importantly, it needs to be coverage you can afford on your fixed income post-retirement.

Fidelty’s most recent Retiree Health Care Cost Estimate offers some very scary information. According to this, the average couple who retires at the age of 65 in 2018 will need around $280K for their healthcare costs during retirement – and this is if they are moderately healthy, with limited preexisting conditions. Individuals or couples with preexisting conditions could see that estimate as much as double, depending on what exact needs are required for wellness maintenance.  

 

Planning Ahead

If you want to ensure your healthcare costs are covered during retirement, you need to plan it out far in advance. Look at it as a challenge to be tackled pre-retirement, so you aren’t struggling once you’ve left the workforce.

The most highly recommended strategy is to use a health savings account, which allows for money to be deposited and withdrawn free of taxes. The catch is you must be eligible. To be eligible you must have what’s known as a high deductible insurance plan. For a single person, this means a required deductible of $1,350 a year. For families it’s $2,700.

There is also a limit on yearly contribution amounts. Individuals below age 55 can contribute no more than $3,450 a year, whereas families are allowed to contribute $6,900. Anyone older than age 55 can contribute only one grand per year.

Another strategy is to delay retiring until you reach 65, which is when Medicare becomes available. This is three years longer than the allowed retirement age of 62. Once eligible for Medicare, 62% of medical expenses are covered, meaning overall healthcare costs in retirement are drastically decreased.

There are limits, however, to what Medicare covers. If this is your only coverage, certain things could incur large costs out of pocket. This makes getting a Medigap policy a necessity for retirees. Medigap policies cover an additional percentage of costs which aren’t covered by Medicare.

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