How to Prepare for Retirement If You Don’t Have $1.2 Million

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The amount of money the experts say you need for retirement is being tossed around a lot lately. Some say that you need $1.2 million to have a happy retirement. Most people will never be able to accumulate that much money in savings. If you are in that category, here are some tips on how to prepare for a happy retirement.

As you get older, it is natural to wonder if you have enough retirement savings. It can be hard to estimate how much you need because the future has a degree of uncertainty in it. You have no idea what your health will be like—or your spouse’s—when you retire, your retirement goals may change, and your financial condition can fluctuate.

A Social Security Administration calculator reveals that the average person can expect to live 20 years beyond 65. If you start now to work toward a better retirement, here are some things you can do to improve your retirement savings.

Delay Your Retirement

Many people that have reached their senior years are still working. Besides helping to keep their minds busy, it also gives them purpose as they grow older. Working longer can enable you to put more money into savings, helping you enjoy retirement more after you need to slow down.

Social Security does not reach its maximum amount until you are 70. It means that waiting about three years after full retirement age could give you 24–32 percent more money per month. The extra years of earned income will also give you more money from Social Security after being averaged with your other income.

Even before you claim Social Security benefits, you can get Medicare once you reach 65. This government benefit will reduce your medical costs considerably. Although you may need to buy Medicare parts B and D (or a Medicare Advantage plan, which is recommended), it will still be much cheaper than commercial medical insurance. You can put the difference into a high-yield savings account and build retirement money faster.

Medicare covers many medical costs, but it does not cover everything. Money.USNews says that Medicare does not cover long-term care, and you will need to pay for out-of-pocket costs, which can be considerable.

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Invest to Help Guarantee an Income

If you have some money available, consider investing in a rental property. Calculate it carefully. BMPWealth says if done right, a rental property can provide you with a good income for many years.

Convert Retirement Accounts to a Roth IRA

If you have retirement accounts with your employer—such as a 401(k) or an IRA—you can convert them to a Roth IRA and avoid mandatory withdrawals. Other retirement plans only allow contributions until you are 70, but a Roth IRA lets you contribute indefinitely.

Match Employer Contributions

If your employer makes contributions to your retirement account, put in at least enough to have the employer max out their contributions. If they will contribute $3,000 annually, make them max it. It is free money for you and will build your retirement account faster.

Consider Downsizing

If you have a larger home than you need, MyBankTracker suggests selling it and moving to a smaller place. Or, if you are renting and can live comfortably enough in a smaller and cheaper place without too much sacrifice, do it and put the extra money into retirement savings. You may also consider moving to a state—or country—with a lower cost of living.

Simplify Your Lifestyle

Besides downsizing, find out what extras you are paying for and can live without. You may want to look at memberships you are not using, high-priced cellular or TV plans, fast-food costs (including specialty coffees), and more. Cooking at home more often is much less expensive than eating out all the time. Put the extra money into your retirement account.

Reduce Travel

Traveling is always going to be costly, especially if you travel abroad. Save money by staying closer to home or making just one overseas trip instead of two each year. You can also travel stateside and still see some amazing sights and have fun.

As you calculate your need for retirement funds, realize that traveling is one expense that usually diminishes as you age. Your ability to travel grows less, and your desires often change, too, meaning you probably do not need as much money as you might think for this cost. MerrillEdge says that research shows the average retiree (65–74) spends 10.5 percent of their income on transportation, but those older than 75 spend only 8.3 percent on it.

Consider a Different Asset Location

Instead of moving to a new location, you may be able to save and get access to more money in retirement by rearranging where you have your assets. Instead of choosing to live on less money when you retire, Kiplinger says you may be able to generate considerably more income in retirement even if you are not working. Asset relocation may enable you to keep living where you are. They suggest converting some of your investments from bond holdings into an annuity.

Convert the bonds into a fixed-income annuity. This type of annuity does not fluctuate with the market and has lower management fees. The money used is aftertax, so you do not pay any taxes when getting withdrawals from the account.

Pay Off Your Credit Card Debt

If you have a lot of credit card debt, you are paying a lot of money each month to the credit card company in interest. In fact, you are probably still paying for items you bought months ago and may not even be using them anymore.

Reduce your credit card debt by focusing on the smaller ones and paying them off first. At the same time, be sure to always pay the minimum amount on all credit card bills. When one bill is paid off, take that same amount of money and add it to the payment on your next larger bill. It will reduce your bills faster—but you must also avoid adding any new charges to your credit cards.

Build an Emergency Fund

Even while paying off your other bills and possibly simplifying your life, you need an emergency fund. When a sudden need for cash appears, an emergency fund can prevent you from having to get more credit or refilling your credit cards.

Preparing for retirement—even if you are starting late—does not mean you should give up hope of a comfortable retirement. Start now to use the above tips and put more money away while you still have time. Getting a part-time job can also help you save more money.

The Epoch Times Copyright © 2022 The views and opinions expressed are those of the authors. They are meant for general informational purposes only and should not be construed or interpreted as a recommendation or solicitation. The Epoch Times does not provide investment, tax, legal, financial planning, estate planning, or any other personal finance advice. The Epoch Times holds no liability for the accuracy or timeliness of the information provided.