I Haven’t Saved Enough for Retirement. Now What?

Jun 18, 2013 3:22:36 PM / by Jason Shaw

 

man-face-wrinkle-blue-eye-oldIt’s a common problem.  You wake up one morning and suddenly realize, I haven’t saved enough for retirement! With increased life expectancy and the unexpected costs that come our way, many of us find ourselves nearing retirement age with less saved than we will need to maintain the standard of living we desire.  According to a recent survey by the Employee Benefit Research Institute, 49% of workers are not too confident or not at all confident that they will have enough money for a comfortable retirement.  41% of workers said that the need to meet current day-to-day expenses prevents them from saving at all or saving more for retirement and, only 46% of workers responded that they or their spouses have actually tried to calculate how much they will need to live comfortably after they retire. So now that retirement is on your horizon, and you’re waking up to the realization that you have not saved enough, what can you do?

Make a realistic assessment of your budget.

  • Calculate your day-to-day living expenses.  How much do you need each month for rent, utilities, groceries, home and car maintenance, clothing, gas, leisure activities, and other regular expenses?
  • Account for your major debts:  mortgages, car payments, credit cards, and any other loans you have outstanding.  Budget for these items for as long as you will need to pay them off.
  • How will you address you health care needs?  Will you use Medicare, private insurance, or a combination of the two?  Will you have dental coverage?  Budget for both premiums and likely out-of-pocket costs.

Take advantage of the savings opportunities you have available.

Look at what you are still able to do to put away more money before you actually retire.  Take advantage as much as possible of employer matching to 401(k) contributions or contribute as much as you can to a personal IRA.  Now that you are nearing retirement, you can no longer think of these contributions as optional expenses.  They must now become a top priority.

Create a Retirement Budget

Calculate what income you will have during retirement and compare it to your projected expenses.

  • How much will you be receiving in Social Security benefits?  If you’re not sure, the Social Security Administration offers an easy-to-use calculator on its website: http://www.ssa.gov/estimator/.  Be sure to compare the income you would receive at different retirement ages.  You may consider delaying retirement to earn the increased benefit available for those who start collecting later in life.  Remember that these benefits are taxable above a certain income level.
  • Will you receive any pension income?
  • Have you accrued stock options or restricted stock awards?

Any difference between your income and projected expenses will have to be made up with investments and savings, part time work, and/or cuts to spending.

Look at how you can increase your retirement income and cut expenses.

  • Delay retirement.  Not only will this increase your Social Security benefit, but it will give you more time to increase your nest egg.
  • Consider working part time after you retire.  A little extra income can make a world of difference.
  • Downsize your life.  Consider moving to a smaller home and driving a more cost-effective vehicle.  Look at which of your projected expenses are necessary and which are optional.  You may need to adjust your expectations of how you will live after retirement.
  • Assess your insurance needs.  Speak to a financial advisor about whether you still need all of the coverage you have.  Retirees often retain the coverage they have had when they are working, but this does not always make sense.  Always speak with a professional before adjusting your insurance coverage.
    • If you no longer have dependents who need your financial help, you may choose to drop or decrease your life insurance.  Beware of tax consequences, however, of dropping a life insurance policy with cash value, and consult with a professional tax advisor for advice on how you might avoid or minimize them.
    • If you are no longer working, you may no longer need disability coverage.
    • If you have enough savings that you are able to self-insure for small losses, consider lowering the deductible of your homeowners policy.

The most important thing for you to do is to face the issue of retirement head-on.  Consult with one of our experts to develop a sound, workable plan for the most comfortable retirement possible.

Material discussed herewith is meant for general illustration and/or informational purposes only, please note that individual situations can vary. Therefore, the information should be relied upon when coordinated with individual professional advice.

Topics: Retirement

Written by Jason Shaw