We all have our dream retirement in mind. Some of us aspire to retire a millionaire. Some of us want to live in a different country where it is summer all year round. There are so many variations but there is one thing that they have in common: you need to be able to financially afford your dream lifestyle.
It is easy to dream about what you want to happen when you retire. But you need to have the finances to support it. Unfortunately, that is where a lot of retirees are having problems. That is the challenge that pre-retirees are facing.
According to an article published on CheatSheet.com, there are 5 statistics that should be scaring pre-retirees today.
- One-third of Americans do not have retirement savings. Despite the fact that there are so many retirement plan options, there are workers who failed to get a plan of their own.
- One-third of those over the age of 65 rely primarily on Social Security. Since a lot of workers do not have retirement savings, they are forced to rely on their Social Security benefits as their primary source of income.
- 20% of people tap into their 401(k). Those who have retirement plans usually tap into them when they have a financial need.
- 60% of pre-retirees believe they have to delay retirement. Most of them blame the Great Recession and the fact that they haven’t really recovered yet. This is despite the economic improvements in recent years.
- Young adults know the importance of saving for retirement but they have other responsibilities. This responsibility mainly refers to student loans. Because of debt, a lot of young adults cannot start saving for their retirement fund.
These statistics paint the reality of retiring nowadays. This is why you need to plan this phase in your life as early as you can. It is not something that you should do at the last minute. You have to know what you want to happen after you retire and what you can do to make that into a reality.
What to do before you retire when you have debt
There are so many things to do before you finally enter into retirement – especially when you are entering it with debt. An article published on Time.com revealed that Americans who are between the ages 56-61 have more debt today than any other time in recent history. This report came from the Retirement Research Center at the University of Michigan. In the past, mortgage and other forms of debt were unusual worries for retirees. Now, a lot of the elderly are in danger of spending their retirement years with debt.
If this is the future that you are looking into, there are a couple of things that you may want to do to survive your retirement despite debt.
- Calculate if you are ready to retire. There are many factors to consider for your calculations. Do you have enough savings? What are your monthly expenses? How much debt do you still owe? Can you afford your dream retirement once you stop working? The answer to these questions will tell you if it is the right time to retire or not.
- Check debt solutions that will get rid of your debts easily. As you are nearing the time to retire, you should consider debt relief programs that can help you get out of debt faster. There are options like debt consolidation loans or debt management that you may be able to complete in 5 years time. If you want it to be shorter, you can opt for debt settlement that will allow you to pay only a portion of what you owe. This debt solution can get you out of debt in 2 years or less. If you are going through undue hardship and you need to get out of debt really fast, then you may want to opt for bankruptcy. If you have a house, you can refinance it to get rid of your multiple debts.
- Identify changes you can make to increase your savings before retirement. If you planned on living in New York, you may want to move to a city that has a lower cost of living so your funds can increase faster. You can also make changes to your lifestyle so your monthly expenses can be lower.
- Consider working while in retirement. In case your money is not enough to cover both your monthly expenses and debt payments, you need to think about earning some retirement income. Some retirees can live comfortably despite their debts if they combine their savings with a part-time income. There are jobs that you can get that are not as stressful as your current career. Or if you are comfortable in your current career, you may want to just cut back on your hours.
These are all important tasks that you need to look into before you retire. But consider carefully other tasks that you need to do in order to make your retirement more comfortable. The tasks will depend on your dreams for the future, your current financial situation and of course, what you are willing to sacrifice to get the life that you want to have.
Tips to make your retirement money outlive you
If you want to keep your retirement fund from retiring before you, there are a couple of things that you can do. You want your money to outlive you because the more you age, the more you will need it. After all, as you get older, your expenses will change – especially when it comes to health care expenses.
According to an article published on USNews.com, the average life expectancy for men is 82 years old. For women, it is longer at 85 years old. That means if you retire by 65, the average age of retirement, you need at least 17 to 20 years worth of funds to survive.
Here are some tips that will help you stretch your retirement funds.
- Get rid of your debts. If you do not have enough money to finance your life when you retire, you need to get rid of the expenses that will lower it even further. Since the balance of your debts grow, you may want to get rid of this expense first. The interest rate is eating up what could be your savings.
- Downsize your lifestyle before you retire. You can do a lot of things to downsize your life so your money can increase right before you retire. You can move to a smaller home. If you own more than one car, you can sell the others and just leave the most fuel efficient. If your job can accommodate a change in location, you can live in a state with a lower cost of living.
- Live a frugal lifestyle. Another tip that you can apply in your life is to live a frugal lifestyle. That means you have to spend only on what is essential for your survival and your happiness. This does not mean you deprive yourself. You can spend on the expenses that will make you happy and will improve the quality of your life.
- Find a passive source of income. One of the ways you can stretch your retirement fund is to earn income while you are retired. However, you may want to continue enjoying your retirement by earning passive income. This means you only have to work hard at the beginning and then sit back as the income continues to flow. Investing in rental properties is one way to do this. Check out your options and calculate the amount that you can risk on this investment.
Surviving retirement despite your debt is not impossible. It will be harder for you – that is for sure. But it will not be impossible to do so. The more you are willing to sacrifice to grow your retirement funds, the more comfortable you will be as you age.