Did you know that the average person in America retires with a net worth of around $200,000? One might think that this sounds like a lot of money, but the truth is, when combined with the average Social Security retiree benefit, this provides a spending lifestyle of around $24,000 a year, which won't cut for most retirees.
In the financial work, we often look at a retirement planning strategy in two main phases, accumulation and distribution. The years leading up to retirement are the accumulation phase, when you are building your nest egg, and the years after retirement, when you start to rely on that nest egg, are the distribution phase. Unfortunately for many, as retirees live longer, they're finding their nest eggs aren't enough. Plus, for others, whose goal is to preserve that nest egg for future generations, are finding it difficult.
This is where the idea of continuing to accumulate within the distribution stage has gained popularity, and there are a few tips to doing it efficiently.
Tip #1: Work During Retirement
Okay, so this tip may not sound like the best of ideas. After all, you want to enjoy your retirement, right? But the truth is, there are lots of jobs you can work during your retirement that won't seem quite like you're working. Take for example that you are a marketing specialist. During your retirement, you could team up with a local charity agency. You could handle their marketing tasks and earn money at the same time, all the while knowing you are making your community a better place to live. Best of all, there are many jobs you do on a part-time basis, leaving you plenty of time to enjoy your golden years. Working during retirement is not only beneficial monetarily, but it provides structure and routine, which is essential to living a well-balanced life. This, of course, is good for your health.
Tip #2: Start Investing
Whether you're an avid investor or new to the game, investing during your retirement is an excellent way to increase your income. It is of the utmost importance, though, that you be extremely choosy regarding the companies you invest in. Consider researching companies that are known for increasing their dividends even when the market isn't doing too well. See, it is companies like this that can increase their earnings over extended periods of time, thus increasing their dividends and keeping their investors happy.
Tip #3: Save Social Security for Later
The earlier you begin your Social Security benefits, the lower the amount will be. If you can hold off, and claim Social Security at the age of 70 rather than at 62, you can increase your benefit by 30 percent or more. Having this in mind, you could always take on a retirement job until you reach 70 and then use the extra money in Social Security benefits that you start receiving to make up for the money you earned while working. Want to continue working your retirement job even after you turn 70? That's fine; it's just more money for you to enjoy during your retirement years. The main thing to remember is that the longer you hold off in claiming Social Security, the higher your monthly benefit amount will be.
Tip #4: Move Somewhere Cheaper
When we say move somewhere cheaper, this can mean two things. Either move into a residence that doesn't cost as much, or move to another part of the state or country that has a lower cost of living. The choice is yours. The point of the matter is to decrease the amount of money spent on your living arrangements. Let's say you currently live in a three-bedroom home, yet it's just you and your spouse. Even if your house is paid off, the utility expenses can run you several hundred dollars a month. Now, imagine living in a one bedroom home with utility bills that cost you right at $100 a month. Over the period of a year, you could save $3,000+ in living expenses.
When we are thinking about retirement planning, we often focus on the working years, and putting yourself in the best position possible prior to entering retirement, but it's just as important to focus your strategy on continuing to accumulate money within and through retirement.
Prepared by Gary Scheer in conjunction with Fusion Capital Management.