It used to be that people looked forward to their retirement, just think of your grandparents. But something has changed and while most Americans welcome the day that they won’t need to work, they dread the conversation on how to pay for retirement.
This makes sense as wageshave remained stagnant over the last 20 years. However, it only tells part of the story as most people are living longer, more active lives and this is making it harder than ever before to save for retirement. Add to this the fact that very few people have a pension and its no wonder that people are dreading their retirement.
But it doesn’t need to be this way as there are several ways to make sure you don’t run out of money in retirement. Keep in mind, each option will require planning and discipline but if you are willing to make small sacrifices today, you will have enough money to live into your 80’s or 90’s.
Cut Back on Your Expenses
You don’t need to wait until retirement to take advantage of this. In fact, cutting back on expenses today will not only give you some extra money for retirement but it will also help you to pay down the balances on your credit cards or your loans. One of the best ways to do this is to set up and stick to a budget.
Beyond this, embracing a fiscally responsible approach to managing your expenses will also get you to a point where you can make do with less. Sure, you might forego that expensive cruise or put off buying a new car for a few years but the extra money in your bank account will make you feel more confident in your ability to enjoy retirement.
One last thing to know about cutting back on your expenses is that you can put the money saved in an interest-bearing account. Doing so will allow your money to go to work for you.
For example, even at an interest rate of 3 percent, putting $1,000 in a savings account then adding $500 every year for next 30 years will net you close to $27,000. That’s just at 3 percent per year if the interest rate was 5 percent, then your money would grow to nearly $40,000 – talk about getting your money to work for.
Hold Off on Collecting Social Security
While this is easier said than done, there is significant evidence to suggest that holding off on collecting Social Security will net you more money in the long run. As such, waiting until you are 70, or even 72, to claim your Social Security payments will increase how much you receive every month – even how much your spouse will receive as a death benefit.
One thing to keep in mind with delaying Social Security payments it that you will need to have an additional source of income between the time you retire and when you start collecting. For some, this might be taking on a new job after retirement. For others, the option might be a reverse mortgage – especially if you are looking for a funding source for just a few years.
An added benefit is that you will essentially freeze your mortgage payments, and this means that you can not only tap into the equity you’ve built up in your home and lower your monthly expenses. If this sounds like a good idea, then you might want to check out what it takes to be eligible for a reverse mortgage.
Secure a Long-term Revenue Stream Before You Retire
No doubt cutting back on your expenses and delaying Social Security payments will give you more money for retirement but in some cases, it might not be enough. As such, you might need to look securing a long-term revenue stream before you retire. This could be an investment in a business which you could run, or it could be via investments in stocks or annuities.
In the case of running a business in retirement, the goal should be to find a business which does not require all your time but can deliver a sustainable revenue stream. This might include becoming a partner in an existing business – though you will need to monitor the financial reports – or finding a home-based business you can run by yourself.
Another thing to keep in mind is that you will be able to keep up with the business as you age. If not, then you will want to make sure your business is something which can easily be sold down the road.
As you can see, making sure you have enough money for retirement requires the ability to control your expenses, hold off on collecting Social Security for as long as possible, and making some shrewd investment choices.