Many of the people I come into contact say, “I wish I would have started saving a long time ago. Then I could retire.” Or they say, “We should have been working with you earlier.” There are many factors which may have caused people’s nest egg to be too small to maintain their ideal retirement lifestyle: didn’t save enough, unexpected adversity, bad investment choices, started too late.
Going forward, you might be able to help your situation by seriously following this short list of strategies:
SAVE, SAVE, SAVE: This is so basic it should go without saying but you won’t have money to retire unless you sock money away. The golden rule was to save 12% of your monthly income but if you fell short of that amount for a number of years it is going to take more to catch up. Many of you are in your prime earning years and if you have kids they should be at an age that you shouldn’t be supporting them anymore (Older than college age is old enough). Discipline yourself to put money into your savings first (401(k), IRA’s, Taxable accounts), pay your bills, and then if you have extra money put it into your savings. An easy way to accomplish this is by setting up automatic deductions so you never have the money in your hands.
WORK A FEW MORE YEARS: Reality check. You don’t have enough money to retire so the only way to save more is to work more. The fact is, for every extra year you work that is one less year you will have to take money from your savings to live. On top of the extra savings you are accumulating, you should also be receiving supplements from your employer for health insurance, matching retirement contributions, and other perks that you won’t receive in retirement.
TAKE A PART-TIME JOB IN RETIREMENT: You have worked all these years and gained a high level of knowledge in your field. Use it to your advantage. Many companies allow employees to in a similar role but on a part time basis and by remote locations. Another factor to consider is that many people who go straight to retirement don’t know what to do with all of their spare time, become bored, and drive their spouses crazy. Working part time will supplement your income, help pay monthly expenses, prolong your savings and provide a transition period between full time work and full time leisure.
RETIRE SOMEWHERE CHEAP: At the front of this idea is avoiding taxes. There are 7 states without income taxes (Washington, Florida, Texas, Wyoming, Alaska, Nevada, and South Dakota). There two other state which only tax dividends and interest income (Tennessee and New Hampshire). Your yearly income will go farther in states that don’t tax it.
LIVE IN A SMALLER HOUSE: The idea here is to sell your larger house, take a portion of the proceeds to buy a smaller house which will have less upkeep, lower expenses (property taxes, energy, utilities, insurance) and put the left over equity into your retirement investments/savings.
KEEP A MORTGAGE: Locking up a large portion of your assets in a house is a bad idea. Because it is hard to pull money out of a house (and expensive to carry a line of credit) you should maintain a mortgage even in retirement. The advantages of having a mortgage are greater liquidity, tax leverage (federal tax credit for mortgage interest) and investment flexibility/diversification.
PROPERLY MANAGE YOUR INVESTMENTS: There is so much to know about managing an investment portfolio that you should use a qualified independent Registered Investment Advisor (RIA). They are compensated for the advice they provide and do not push products or charge exorbitant commissions. You are taking great risks by either being too aggressive or too conservative with your investments/savings. As an RIA, I will help you determine the optimal level of risk for your money, develop your personal investment plan and work with other professionals to make your plan efficient.