Most working adults nowadays tend to shy away when it comes to retirement. According to them, retirement still so far away, and they don’t want to tackle it yet until the next 10 or 20 years. They tend to focus on achieving their dreams and goals in the present like saving for their dream house or car, paying off their student debts, paying the bills, or saving for their next travel getaway.
While it seems easier to focus on accomplishing tangible goals, the financial experts advise you should start planning for your future and retirement while you’re still in your prime days.
Depending on your net income, living expenses, as well as your expected life-span, you can get an estimation with your financial advisor to determine the amount you need to support your life during your golden years without depleting your funds due to unexpected expenses or shortfalls.
How to Determine Your Average Retirement Cost?
According to the data obtained from Gallup and the U.S. Government, most working adults consider the age 61 as their retirement, although most working adults claim they plan to work longer.
Meanwhile, the Centers for Disease Control and Prevention says the life expectancy of people who reach the age of the 60s will live for another 23 years. So they recommend you should prepare in advance to support your retirement during those times.
Your actual lifespan and retirement funds would depend on your current lifestyle, income, and family background.
According to the Bureau of Labor Statistics, a retiree’s average annual cost is around $46,000 for 65 years old and older. All retirees also listed their top three monthly expenses as the following:
Housing/Rental: $1,322
Food:$484
Healthcare: $500
Aside from that, about half of the retirees’ income mainly come from their Social Security, as well as state-sponsored government and some private pensions they acquired during their employment. Meanwhile, most of the retirees’ personal savings and investments only support 6.9% of their total annual costs.
Determine Your Retirement Funds’ Lifespan.
To get a detailed assessment on how much money you should save and how long it can last, the financial experts recommend you use an online retirement calculator.
You can input your net salary, your expenses as well as your investment profile to determine possible investment returns (based on historical data), your reasonable withdrawal rates as well as your life expectancy.
If the retirement calculator shows you’re going to outlive your retirement funds, the experts recommend postponing your retirement party at a later date. This strategy can help increase your savings especially since you are at the peak of your earning years.
Most financial experts recommend you start reaping your Social Security pension when you reach 66 years old.
Aside from delaying your retirement, another way of increasing your retirement funds is by working longer. Not only will you increase your cash flow, but it also allows your investment to grow. Aside from that, the additional funds you contribute to your Social Security can increase your benefits paycheck when you start receiving your pensions. Your investment can grow up to 8% annually if you delay your pension until you reach 70 years old.
How to Make Ends With Your Retirement Funds
If you’re a retiree and you’re struggling with overcoming your retirement savings, the experts recommend you apply these tips to help you cope up with financial shortcomings without outliving your savings:
Leverage Your Real Estate Property
Your checks only stop when you decide to exit your house or move elsewhere.
If your home or real estate property still has a substantial equity value, file for a reverse mortgage to create a passive income out of your asset. You can receive regular pay as long as you live in the house.
Pay for Immediate Annuity
Although most annuity investments are commonly tied to insurance policies and you need to pay it for a couple more years, it’s recommended to pay it up front if you have enough money. This helps to ensure you’ll receive monthly payments to increase your retirement cash flow in the long run.
