Yet many seniors may need to do just that, and the reason is because they don’t have enough retirement savings. Today’s retirees have a median savings of $ 45,000, reports Transamerica, and that excludes home equity. And while the latter can serve as a source of retirement income of sorts, it cannot replace a robust IRA or 401 (k).
If you’re nearing retirement and envisioning savings of around $ 45,000, take this as a red flag that you’re not ready to quit work just yet. If you do, you could really be setting yourself up for long-term financial hardship.
You need healthy savings to get by
There is no single savings number that will give you financial security during retirement. Some seniors can start their golden years with $ 100,000 in savings and do very well, while others may retire with $ 1 million and still struggle. But as a general rule, it’s a good idea to end your career with around 10 times your final salary set aside for the future. If your savings balance is closer to $ 45,000, that means you are probably far away.
What should you do in this scenario? On the one hand, force yourself to work longer. This will allow you to both accumulate additional savings while leaving your existing savings alone. If you’re 65 and ready to retire, but instead work until 70, while contributing $ 500 per month to a pension plan and investing it at a conservative average annual return of 5% , you will add over $ 33,000 to your nest egg. .
Another tactic to use in this scenario is to delay your Social Security filing until you turn 70. You are entitled to your full monthly benefit at age 66, 67, or somewhere in between, depending on your year of birth. But for every year you delay beyond that point, your benefits increase by 8%, up to age 70. And to be clear, this increase is permanent.
Will a savings of $ 45,000 allow you to spend your retirement?
Financial experts have long supported a 4% annual withdrawal rate from savings. For $ 45,000 in savings, that means $ 1,800 in annual income. Combine that with $ 18,000 a year from Social Security, like the average elderly today, and that’s still not a lot to go through.
If you’re not yet retired and don’t have a lot of savings, it certainly pays to boost your nest egg as much as you can while delaying your Social Security record to increase your benefits. But even that may not be enough. You may still need to think about getting a part-time job as a senior, renting out a portion of your house, or resorting to other creative measures to make sure you can make ends meet. Either way, the key is to be realistic about your retirement income needs – and do not go into your senior years assuming you’ll be fine with $ 45,000 in your name.