Unless you plan to work until you drop, you must prepare for retirement.
According to The Balance, the average amount saved for those who are 50 to 55 is $124, 831 (“Average Retirement Savings,” 2018). You don’t need a calculator to realize that $124,000 is not enough.
Here are some steps to take to make sure you are financially ready to retire:
Dare to Downsize
Some homeowners, who have watched the value of their homes decline in recent years, are reluctant to sell until the real estate market rebounds. Even if your home hasn’t returned to its former value, moving to a smaller, less expensive home can save you thousands of dollars a year in taxes, utility costs, and insurance.
These savings can be funneled into retirement savings. You may need some help with this approach but do the financial analysis and make a wise decision.
Consolidate Your Orphaned 403(b) or 401(k) Plans
You’ve probably changed jobs several times and you may still have money in former employers’ retirement plans. Leaving money in a former employer’s plan is not as bad as cashing it out. But as you approach retirement, it is a good idea to consolidate your savings into one IRA.
There is another step you can take prior to retirement, and that is to consolidate your retirement accounts with one vendor. Then, upon retirement, it will be easier to move to an IRA. Or, you may leave the account with that final vendor. You will get a better handle on how much money you have and where it’s invested by consolidating your accounts. You will also have more investment choices and pay lower administrative expenses.
Don’t forget, if you have ministerial status, you need to leave the money in your 403(b)(9) account to take advantage of the Housing Allowance Distribution.
Consider Long-Term Care Insurance
A well-funded retirement savings plan could be decimated in a matter of months if you end up in a nursing home or require round-the-clock home health care. Medicare doesn’t cover the cost of long-term care and Medicaid isn’t available until you’ve spent down most of your savings.
Long-term care insurance could prevent this from happening, but make sure it fits your budget before making such a purchase. The costs are often high. If you do not take out long-termcare insurance, set aside or allocate 3-5 years of the monthly cost of assisted care living expenses in your area of the country.
Weigh Your Social Security Options
You are eligible to file for social security benefits when you turn 62, but if you do, your monthly check will be reduced significantly for the rest of your life. You may have little choice if you are out of work or in poor health and need the money to pay expenses. But if you have the wherewithal to work a few more years or have other sources of income, delaying checks until age 66, or your full benefit age, will increase your monthly amount by 33% or more.
Earn Supplemental Income
You can also supplement your earnings by working and/or consulting part time in your area of expertise. In retirement, you can get paid for doing your favorite hobby. Think of how you can use your knowledge and skills to earn additional income. At 97 years of age, Billy Graham received royalties on the book he wrote many years back.
Looking for faith-based IRA options? The FaithBased IRA from Envoy Financial could be the perfect solution for you!