Saving Grace
Plan ahead to ensure a safe, comfortable future.
With an ever-changing global economy, turbulent political landscape, and an unpredictable future on so many fronts, it’s only natural to ask, “What will my future look like when it’s time to retire?”
Experts agree that saving is key, but what other tips and tricks can help you make your money last into those autumn years? An individual may need 55 to 80 percent of their pre-retirement income post-retirement, according to a Fidelity estimate. This means smart planning now can make the difference between a comfortable retirement and one lived on a shoestring.
Forbes shares that budgeting is key. To put it plainly, don’t make a habit of spending more than you earn. While it may be fun to make glitzy purchases and go on glamourous trips, extravagances should not come at the expense of comfort down the line. In short, living within your means is essential to enjoying financial security later in life.
Take a multipronged approach that includes looking at ways to cut back on unnecessary expenses and eliminate debt. Interest rates for credit cards these days can run upwards of 30 percent, so there’s great incentive to pay those bills in full and on time.
Most people have heard the advice, “Pay yourself first,” and banks such as Capital One and Wells Fargo agree. Wells Fargo advises making this strategy a habit, and encourages smart savings strategies such as allocating a set percentage of every paycheck into an account, versus falling into the trap of using that money on unnecessary day-to-day purchases.
Keep up with paying bills and debts, Capital One advises, but leave room for the “pay yourself first” approach. Automatic transfers can make this easier.
Lifespans are growing longer—excellent news, of course—but longevity further underscores the importance of planning. While annuities such as social security provide peace of mind, AARP says holding off on taking advantage of those benefits may be beneficial, provided the individual is in good health. “Payment levels increase up to 8 percent for each year you delay beyond full retirement age,” according to a November 2023 AARP article.
Merrill Lynch advises planning for long-term care costs. At present, half of retirees will live to 92, and 25 percent of those people will live to be 97 years of age. The firm cites a statistic from the U.S. Department of Health and Human Services, which estimates about 70 percent of people who are presently 65 will need some form of long-term care in their lifetime.
Take advantage of online tools from trusted sources, such as AARP’s Retirement Calculator, to take a look at your own retirement timeline. Get a realistic picture of when you can retire and think about the manner in which you’d like to live your life. Will it be simple and frugal, or do you have adventure on the agenda?
It’s a lot to think about, so it may be wise to consult a financial advisor and have a frank conversation to answer these questions and discuss strategies you can employ now to start preparing for the future you want. Ask about how different investment options are taxed, because taxes can make a significant difference. From stocks to bonds to IRAs, options abound. A financial professional can help you decide vehicles will be best to help you reach your ultimate goal.
Published (and copyrighted) in Suburban Life magazine, February 2024.
