How To Ensure That You’ll Have Enough Retirement Savings To Live On

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retirement-savings-by-Argonne-National-LabratoryIf you want to hear 15 different opinions about retirement savings all you need to do is ask 15 different financial advisors.

Talk about a gloom and doom picture!

Many baby boomers coming real close to retirement age see these huge numbers being projected as dollars required to survive retirement that, due to good health, may last 25 to 30 yrs.

Does that mean that the vast majority of us who have meager savings are destined to spend our later years standing in soup lines? I’m here to tell you it just isn’t so.

 

How Much Money Do You Need?

Have you ever noticed that the majority of advertising (and many TV programs, as well) assume that all Americans are living at an income level that, in reality, is only enjoyed by maybe 10% of the population?

Per capita income charts cloud the issue even further, since the one key issue they fail to mention is that the figures posted are “average” incomes. What that means is at least half the families polled are living well below that figure!

Your retirement savings plan needs to be sufficient enough to supplement Social Security and whatever other retirement programs you may be participating in with the goal of matching your current or projected standard of living. That means if your current working lifestyle consists of a huge McMansion house, 2 to 3 cars, a boat, an RV, and whatever other toys — combined with a jet set lifestyle traveling all over the world — then yes, your retirement savings better be pretty sizable.

Let’s be realistic. How many people after age 65 really live life to that level?

Not many. A more reasonable picture is the children have all grown and moved on with their lives. Mom and dad sold the big house and are living in a smaller apartment with one economy car which is primarily their grocery-getter. Once or twice a year they make a trip out of town to visit the kids.

It’s a pretty simple lifestyle which requires a small percentage of what their working income was during their career years.

 

To help you determine how much retirement savings you need, check out these 4 steps to determine how much money you need to retire. It comes down to this:

  • Determine your personal monthly expenses at retirement age.
  • Determine all the income you might have coming in at retirement age (either directly, or through other means like Social Security).
  • Whatever gap there is between your income and your expenses is the extra money you would need to obtain in order to retire and live comfortably.

 

 

5 Tips To Prepare For Your Retirement

#1 Avoid debt.

Avoiding debt like the plague is the best way to achieve this level of security on a less-than-average career income. As you see retirement looming on the horizon, living without debt guarantees that you’ll be living within your means. By doing so, you will also find small ways to cut costs and save money.

This isn’t nearly the sacrifice it sounds like. As we age more often than not our desire to buy more, do more, be more just starts to wane. As you enter your 50’s being content with what is, becomes normal. Finding ways to make life simpler and easier becomes your objective rather than expanding and complicating your financial status even further.

 

#2  Downsize your lifestyle.

Taking steps early to downsize your lifestyle will help you prepare for the inevitable time when you must downsize due to deteriorating health. Keeping and maintaining a 4-bedroom home (because that’s where you raised your family and one day you may need one of those 4 empty bedrooms when they come to visit) just doesn’t make good financial sense. All of that equity you’ve built up over the years will better serve you as part of your retirement savings. It will fill the gap between Social Security and any pension plan you may have.

 

#3  Do not cash out retirement funds.

When you leave one job for another, never cash out your retirement fund that you have vested from the first employer. No matter how small it is over the years, it will earn interest and it will grow considerably becoming an important part of your retirement formula.

 

#4  Understand your true needs.

Take the words “disposable income” out of your vocabulary. That insinuates that after you pay your bills, the rest is “play money.” It’s better to look at things with these questions: “Do I really need this?” and “Do I really need it now?”

 

#5  Figure out now what you plan to do with your time after you’ve retired.

Sitting around the house will get mighty old after the first week (or two). Working part-time can fill that void while also filling the financial gap between Social Security and living your preferred lifestyle. It’s also a good way to build up your savings for the final years when working may no longer be an option.

 

This is not to say that all financial planners are out of touch with reality when it comes to the average Joe working to make ends meet with little hope of building a sizable nest egg. All I’m saying is retirement may seem like a big black hole in your future, but when you sit down and add up all the little pieces to the puzzle, the picture may not be nearly as bleak as you thought. Hidden or forgotten assets can go a long way in filling your financial gap.

 

Some Assets To Consider

  • Home equity
  • Whole life insurance policies
  • Small pensions from previous employers
  • Extra vehicles and expensive toys you no longer use
  • Inheritance due in the near future

Check out this excellent online video series: Ben Stein Talks Retirement (Part 1, Part 2, and Part 3).