Lifespans continue to increase due to better nourishment and medical care. For most Americans, it means that they need to save more for retirement than their parents did because they will live longer. If they do not, they will likely be among those seniors who outlive their money.
Estimate What You Need for Retirement
Get a good idea of what you will need during retirement. Instead of guessing, you can use a retirement calculator at Bankrate to estimate retirement savings you need and get a more accurate picture. While no one can predict the future of taxes and investments, it will help you understand where to direct your aim.Calculate Social Security
Before deciding when you want to retire, get a good idea of your potential Social Security benefits. If you are depending on it for income during your retirement, there are some things you need to know before retiring.The longer you wait before collecting Social Security, the more money you can receive each month. You reach the maximum amount when you turn 70, which gives you about $1,000 or more than you would get if you retired at 62. It may mean waiting longer before you retire—if you want to get the maximum benefit. Remember that the more you get from Social Security, the less you need from other sources.
Use Tax-Advantaged Savings Programs
If your employer offers a retirement program, get enrolled in it. Learn about the details first, such as if they offer matching contributions. If they do, find out how long before you are fully vested—when you fully own the matching contributions.Consider putting some of your retirement savings into a Roth IRA or Roth 401(k) if they offer it. Although you will pay taxes on your contributions to these accounts, there will not be any during retirement—which means you will have more monthly income.
Create a Budget
Because some people live longer than expected (100 or more), it is a good idea to save for at least five more years than what is projected for your age. Base your annual retirement budget accordingly and stick to it. Most retirement advisors suggest using the 4 percent rule: spending only 4 percent of your retirement money each year.
Spend Down Your Bills
Before you retire, seek to have all your debt paid. It includes your credit cards, mortgage, car payments, and all other debt. Doing so will let you live on a reduced budget and still enable you to enjoy some of those things you want to do after you stop working. If you live in a large house, and an expensive area, consider downsizing and moving to a more economical area.Automate Your Savings
Choosing automatic deposits into your retirement account will make it easier than doing it manually. The sooner you start saving—the better. MerrillEdge says adding 2 percent can give you an extra $110,000 after 30 years.Anticipate Medical Expenses
When you make a retirement budget, remember that medical expenses will come for you or your spouse—or both. After you turn 65, CNBC says that couples will likely spend an average of $315,000 for them during your retirement.Cash Out Life Insurance Policies
One more way to ensure you have enough money to get through retirement is to cash out any whole life insurance policies you still have. Each of these policies has a cash value you can get either part of or all of it, which will cancel the policy.The best way to save for retirement and ensure you will not run out of money begins with saving enough money in the first place. Starting early—in your 20s if possible—and maintaining contributions as long as possible will enable you to have considerable savings by the time you retire. Talk to a financial advisor about their recommendations on how to save even more money, or if you are retired, then talk about setting up a budget.
