WHEN RETIREMENT ISN’T AN OPTION
Worried that you won’t be able to afford to retire? You’re not alone. The average American has less than $88,000 saved for retirement, according to a 2018 survey. Social Security can help, but that monthly payment probably won’t be enough to live comfortably without working, changing your spending habits, and making other lifestyle adjustments. By taking steps like these, financial planners say, you’ll be able to plan for your “non-retirement” and live the way you want to.
CREATE A SPENDING PLAN
Whether you’re young or old, creating and sticking to a monthly budget is one of the simplest, smartest things you can do. Even if you qualify for the maximum monthly payout from Social Security in 2019, which is $3,770, that amount can go quickly once you’ve accounted for food, medication, housing, and your other living expenses. The Securities and Exchange Commission has several free financial-planning tools to help you get started on a budget, including a retirement calculator.
GET HELP PAYING OFF DEBT
It’s hard to save money when all of your disposable income is sucked up by high-interest debt. The average American household carries more than $15,000 in credit card debt. Factor in mortgages, student loans, and other debts, and that average debt balloons to nearly $135,000. For some people, getting out from under that financial burden is the biggest obstacle to saving. A reputable non-profit credit counseling organization can help you consolidate your debts and create a repayment plan that you can afford.
CREATE AN EMERGENCY FUND
Having an emergency fund is a wise move no matter what your age. Financial experts recommend having six to nine months of savings equivalent to income in the bank. Start small by setting up a savings account that automatically withdraws a set amount every month from your checking account. Some institutions, like online bank Smartypig, even allow you to set goals for your savings.
START SAVING AT WORK
If your employer offers a 401(k) or 403(b) retirement account, contribute as much as you can afford to. Financial experts recommend channeling 10 to 15 percent of your pre-tax income into these kinds of retirement funds, many of which are invested in stock and bond mutual funds. By law, you can contribute up to $18,500 per year in these kinds of savings plans. If you’re over 50, you can save an additional $6,000 in “catch-up” contributions. Many employers also match worker contributions up to a certain percentage, an added incentive to save. By law, you can begin withdrawing that money at age 59½ without penalty, though you may be able to access those funds sooner under certain circumstances. At age 70 ½, federal law requires that you begin drawing down these savings.
ESTABLISH AN INDIVIDUAL RETIREMENT ACCOUNT (IRA)
If you’ve maxed out your annual 401(k) contribution or just want another vehicle to save money while you’re working, a Roth IRA is another option to consider, says David Vogel, president of Vogel Retirement Solutions, based in Roswell, Georgia. “There is no age limit with a Roth. The money will grow tax-deferred and when you take distributions, they are tax-free.”
TAKE SOCIAL SECURITY AT THE RIGHT AGE
You can qualify for Social Security payments as early as age 62 or defer it. For example, the maximum monthly payout for some 70 years old is $3,770 in 2019, but just $2,209 for someone aged 62. “Taking Social Security as soon as you can may feel good but may prove to be short sighted for your future,” says Jay Ferrans, president of JM Financial & Accounting Services in Southfield, Mich. If you have a disability, you may also qualify for Social Security’s Supplemental Security Income program.
PLAN FOR YOUR PARTNER
f you’re partnered or married, make sure you have a plan in place for your significant other in case one of you passes away first, says “The survivor will not only lose the income from your employment but will also lose the smaller of the two Social Security checks,” says Ferrans. For those who have a pension, make sure you have a 100 percent survivor annuity, which guarantees the payout rate will not change for your spouse after your death.
TAKE CARE OF YOUR HEALTH
Health is wealth, the old saying goes. If you are in poor health, you may not be able to work enough to support yourself and your medical care may be a financial burden. The good news is that no matter how old you are, you can begin a simple health-care regimen that will pay benefits down the line.
APPLY FOR MEDICARE AND MEDICAID
Adults over 65 automatically qualify for Medicare, which can provide a base level of low-cost health care coverage, but you may be eligible for it earlier if you have a disability. Medicare’s Extra Help program is available for qualifying seniors who already use Medicare. It’s a program designed to help pay for monthly premiums, annual deductibles and prescription co-payments. For people with very low incomes or other needs, Medicaid is another option.
For many older Americans, owning a large home can be a challenging and costly liability, said Jamie Hopkins, director of the Center for Retirement Income at The American College of Financial Services. “While the home is the largest asset for most retirement age Americans, housing costs are often the largest expense,” he says. Consider selling your big home and moving into a less expensive rental or a smaller home that comes with less costly maintenance and decreased property taxes.
RELOCATING COULD HELP CUT COSTS
If you live in a part of the country with a high cost of living, such as the Northeast or Southern California, moving to a less expensive part of the U.S. may make financial sense in the long run. Tennessee has no state income tax and health-care costs for retirees are below the national average, according to Kiplinger. Florida is another low-tax state that also has one of the highest populationsof seniors in the U.S.
MONETIZE YOUR HOUSE
If you don’t want to downsize or move, trusted short-term rental sites like AirBnB and Homeaway can help you supplement your income by renting out a room, a second residence, or even offer your specials skills and talents to visitors. There are even websites that facilitate renting out your driveway or other parking spaces to earn side income, such as Pavemint.com and JustPark.com.
TAKE OUT A REVERSE MORTGAGE
Reverse mortgages, available to those 62 and older, are a finance option that will provide you with a cash payment each month that can help cover bills. They’re called reverse mortgages because instead of you making monthly payments to a lender, the lender makes payments to you. This arrangement requires relinquishing equity in your home in exchange for those payments however, so don’t rush into them without doing your research, the Consumer Finance Protection Bureau cautions.
APPLY FOR SUBSIDIZED HOUSING
If you have very little income or find yourself in an unstable housing situation, the U.S. Department of Housing and Urban Development (HUD) may offer some options, particularly for older persons. “HUD created affordable housing for Americans across the country,” says Holly Peterson of Elite Retirement Strategies, based in Idaho Falls, Idaho. “They offer three different kinds of assistance that are primarily for independent seniors. If you have questions, you can even talk to a HUD-approved counselor to ask questions specific to your situation.”
GET A ROOMMATE
Another option for reducing housing expenses is finding a roommate. “Many people are fortunate enough to have family they can move in with during their senior years, but this isn’t always the answer,” says Peterson. “There may be other seniors in the same situation who are looking to cut costs by sharing housing with someone else.” This can be a good idea for many reasons. Not only will you reduce the rent or mortgage, but you may also have someone to split grocery costs with as well. There’s also the added social bonus that comes with having a roommate.
SELL YOUR LIFE INSURANCE POLICY
If your children are grown and financially independent or you don’t have a spouse, one way to cut costs and help add funds to your savings is to sell the policy in what’s known as a life settlement. It’s an approach that allows you to access the equity value of an old policy, says Lingke Wang, co-founder of Ovid Life, a life settlement brokerage in San Francisco. “Even term life insurance policies may be eligible for a life settlement. Many people see a return of 20 percent of their policy's face value, which is typically more than you'd get by cashing out the policy.”
If there’s one thing retailers love, it’s offering discounts to older shoppers. Become accustomed to doing much of your shopping, eating and spending at places that offer senior discounts. “Many grocery stores, restaurants and retail stores offer an extra percentage off for seniors, which can add up to some serious savings,” says Peterson. Thrift stores, Craigslist, and Facebook Marketplace are other great options for finding bargains and saving money.
PLAN FOR A FULL AND ENRICHING LIFE
Our lives are what we do every day. In addition to simply worrying about making ends meet, lay the foundation for a well-rounded life as you age. “Having a strong social network is also important for one’s happiness. Work on the non-financial aspects of your life too (your health, your relationships, your faith, your hobbies, and your passions) and you can have fulfillment in your senior years,” Vogel says.