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Strategies for When Retirement is Right around the Corner

  • By Vera Gibbons
  • August, 2012
  • published in: Retirement
 

If you’re in your 50s or early 60s and haven’t saved enough for retirement, you’re not alone. In fact, according to the Employee Benefit Research Institute, only 40 percent of Americans age 55 and older have saved $100,000 or more, with only 22 percent have saved $250,000 or more. While this makes the road to retirement security challenging and a bit more frustrating, here’s how to feather your nest egg:

1. Have a plan
First, the good news: we’re all living longer. In fact, according to the Centers for Disease Control and Prevention, the average life expectancy is now over 78 years old – for the first time in American history. If you’re healthy and have good genes, you can expect to live even longer. Now, the bad news: a longer life span means a longer retirement, and may mean health deterioration and related additional expenses. That means you’re going to need to fund and grow a retirement income stream. While the economy feels uncertain, and no one knows what changes might be in store for Social Security, Medicare, and the U.S. tax code, that’s no reason not to have a plan. In fact, all the more reason to have a plan, given these uncertainties. At a bare minimum, know how much money you need to save, protect and grow for a sustained predictable income in retirement.

2. Save more
The catch-up contribution is a special type of retirement savings contribution that allows older Americans, age 50 and older to make additional contributions to their 401k and/or individual retirement accounts: an additional $5,500 each year to a 401k; an extra $1,000 to an IRA. There’s no easier way to expand your retirement savings, make up for under-contributing or investment losses in prior years.

3. Spend less
Little differences in spending today can make a big difference in your retirement savings tomorrow. It’s critical that you take a close look at all your expenses in every category, from entertainment to travel to food. Did you know that workers can spend about $3,000 a year on coffee and lunch alone? Determine where you can cut back and save more.

4. Consider working longer
According to a recent MassMutual study, more than half (64 percent) of respondents believe they will have to work at least part time in retirement. This is due to any number of reasons – from our wanting to keep our health insurance benefits to our desire to remain productive and active to simply just needing more money. How lucrative can working longer be? According to the Center for Retirement Research at Boston College, if you delay your retirement for just three years beyond age 62, you could boost your retirement by more than one third because you’d be saving for retirement longer, postponing withdrawals, and receiving more from Social Security. Plus, you may qualify for Medicare, which could eliminate the need to buy private health insurance.

5. Redefine your vision of retirement
While demographic surveys show that most retirees “age in place” (in other words, we continue to live in the same house, or at least the same community), downsizing or moving to a less expensive community can help your retirement assets last longer.

What do you think? We’d love to hear your tips.

Strategies for When Retirement is Right around the Corner

About the author

Vera Gibbons, a financial journalist based in New York City, has written for Inc., SmartMoney, Kiplinger’s Personal Finance, walletpop.com, cnbc.com and The New York Times. Gibbons is also a Financial Analyst for MSNBC. She appears on all NBC platforms, including the Today Show, Nightly News and The Weather Channel’s Wake Up With Al, hosted by NBC’s Al Roker.

The content on this web page has not been previously published and is sponsored by MassMutual.

MassMutual Financial Group is a marketing name for Massachusetts Mutual Life Insurance Company (MassMutual) and its affiliated companies and sales representatives.


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