By Sindy Berkowitz
Every day, roughly 10,000 Baby Boomers retire. But many of them do so unaware of the challenges they will face when living off their savings alone. The Insured Retirement Institute recently found that the average American will enter retirement with an income gap ranging from $3,864 and $12,072. Such a disparity is unsustainable, and even if it doesn’t disrupt your lifestyle now, it is likely to do so in your later years when you’re less capable of addressing the problem.
In Part 1 of this series we addressed some of the core challenges facing American retirees today. In Part 2, we’ll take a look at some ways that you can alleviate your retirement concerns.
Consult with a financial advisor: Retirement planning is a big job, and it can be difficult to have the knowledge and experience necessary to go it alone when trying to maximize your wealth to meet your retirement objectives. A financial advisor can help you get the proper context, help you shape a budget, and offer great advice to help you plan effectively.
Take advantage of employer benefits: If your company offers a pension plan or retirement account benefit like a 401(k) or IRA, you should do everything you can to take advantage now—especially if your company matches contributions. After you retire, certain benefits may no longer be available to you. If all your retirement accounts are already fully funded, you have other options available. If you’re over 50 and just starting out, though, you may be eligible for catch-up contributions that offer higher contribution caps.
Put additional funds into an annuity: Annuities provide a guaranteed income stream for life, making them a good consideration for retirees. Annuities, unlike 401(k) or IRA accounts, do not have a maximum contribution limit, and have several other unique characteristics that set them apart from other retirement savings accounts.
Delay Social Security payouts: Retirees can begin collecting Social Security at age 62, but your monthly paycheck depends upon when you start collecting, and your full retirement age. Every year that you delay past your full retirement age increases your payout by 8 percent. So if two individuals with a full retirement age of 65, for instance, start collecting Social Security at 62 and 67 respectively, the individual who deferred payouts will see a 30 percent higher payout.
Asess your risk tolerance: All investment vehicles will come with a varying degree of risk. That’s why it’s important to diversify your holdings. That said, every individual has a different lifestyle, different goals and expectations for retirement. While some retirees want a more conservative, low-risk and assured income in retirement, others may find themselves looking to take a more aggressive approach to accumulating wealth post-career.
At The Milford Bank, we have been helping Milford and Stratford retirees develop successful saving strategies for generations. But Baby Boomers face unique challenges unlike those before them. To get started with a retirement strategy that will work for you, stop by a Milford Bank location today. You can also learn more by checking out our Online Learning Center.