Are you nearing retirement and wondering if you’ve saved enough over the years to live on for the long-term? The average American only has around $200,000 saved by retirement age, which isn’t much to live on for another 20+ years.
Of course, Social Security could help, but that isn’t something to count on. And, if regular expenses exceed Social Security costs, you could end up draining your nest egg quicker than you thought.
However, there is hope, and there are ways that you can increase the life of your retirement fund. Here are four easy ways to start increasing your retirement fund, so you can increase the life of your retirement.
If you live in a high cost of living area, like a big city or expensive state, consider moving and/or downsizing. For example, a $500,000 nest egg won’t go far in San Francisco or New York City, but it will go far in a smaller town in Texas (which also doesn’t have any state income tax).
Also, the bigger your home, the more expenses you will have. If you’re okay with selling it or giving it to another family member, you can then rent a small place (or buy a smaller home) and save the difference.
Some retirees have even gone as far as moving to lower cost of living countries, like Costa Rica, Belize, and Thailand. These countries can stretch your dollar a lot further, and typically have decent health care, fun things to do, and a great living environment on a smaller wage.
Now is also the time to either pay off remaining debt, or get rid of it. If you still have a mortgage, it’s important to sell the house or find a way to cut that cost out of your monthly budget. You don’t want debt digging into your retirement fund.
If you’ve signed on as a co-signer for loans for family members or your kids, it may also be time to cut those loose as well. Don’t be stuck with someone else’s burden.
There are quite a few benefits for saving and investing passed a certain age. If you’re working a traditional job that offers a 401(k), you can save an additional $6,000 each year after the age of 50. And, if you have a Roth IRA, you can save an additional $1,000 each year.
That’s a grand total of $32,000 saved each year if you max out all contributions. If you do that for all 15 years until the average retirement age of 65, you can increase your nest egg by $480,000, not including interest.
Of course, not everyone can save $32,000 a year, so at the very least, try to max out your Roth IRA and contribute more to your 401(k) if possible. Something is better than nothing.
Create Passive Income
If you don’t want to depend on Social Security, or if your nest egg will be a tad smaller, another way to increase the life of your retirement fund is to create passive income. There are a few ways that you can do this, but the most popular are investing in rental properties and investing in dividend stocks.
If done correctly, these ventures can earn you money every single month, and aren’t a part of your traditional nest egg. So, potentially, they’ll earn you money even when your nest egg runs out or after your death.
Having a monthly income is a great way to lower your money withdrawals from your nest egg, as well as helping you achieve the quality of life you had before you retired. If anything, try to replace at least 50% of your monthly take home pay with passive income, in order to avoid using your nest egg too much during retirement.
Wait to Receive Full Benefits
While you can start receiving your Social Security benefits as early as 62 years old, waiting until you’re at least 67 has its perks. For one, the earlier you start receiving benefits, the lower your monthly payment.
If you wait until you’re 67, you’ll collect 100% of your Social Security benefits. Your benefits increase by 30% by the age of 67 (at age 62, Social Security benefits are around 70%). That’s not only more money earned, but also more of a chance for you to work and save money for retirement as well.
And, you can wait as long as you want to receive social security. So, if you wait to retire until you’re 70, your benefits will be around 132%, which again, is more money in your pocket every single month.
Plus, by waiting to retire, you also get to take advantage of Medicare and other retirement benefits. If you retire too early, you’ll have to supplement these items yourself until you’re at least 65.
Overall, with a bit of planning and smart financial moves, you’ll be able to live comfortably for the rest of your life. Outliving a nest egg is a scary thought, but it doesn’t have to be a reality. By saving, cutting out unnecessary expenses, and being smart about when to retire, you can set yourself up for retirement success.