A lot of people are looking ahead to their retirement years with a sense of dread and foreboding. While there are certainly plenty of people out there who say these will be the best years of their lives, many more people are discovering that they will need a lot more money than they have saved. Unfortunately, saving this money has become problematic as a lot of the traditionally “safe” investments have gone through years of low returns and many older people are discovering that it will be hard for them to work as long as they would have liked.
Fortunately, there are ways to still have a good retirement, even if you don’t have the amount saved that you thought you would have. If you’re getting depressed at the thought of retirement, try these steps to get you back in the right direction.
As a place to start, a retirement calculator isn’t a bad idea. Many of these calculators are good at being able to provide a person or couple with information about their expected income from Social Security or their IRA account. While this is valuable information, it’s only useful if a person or couple has a solid plan of what they want to do with that income.
This means that a good plan for retirement usually starts by coming up with a plan of how a retiree wants to spend their time. Specifically, think about where you’ll live and what activities should fill your days. While many people have a general idea, now is the time to determine the specifics of the plan.
After determining this, it is time to determine if your potential income will cover your plan for retirement. Run several different scenarios that incorporate different life events when determining this. For example, consider what would happen in the event of a medical emergency, a large vacation and/or if you needed a large home repair. While you’re doing this, also compute several different income scenarios. For example, many people need to see what would happen if they suddenly lost their social security check, or if their IRA suddenly dropped in value.
While looking at these different scenarios, you’ll be able to get a much clearer idea of how much you will need to plan how to retire. Of course, very few people look at these scenarios and decide that they have enough in savings. Because of this, many people choose to increase how much they save. Think about what expenses you could cut. If there’s nothing that could be cut that would generate enough extra money, then it’s time to look at ways to earn more money.
Working longer is rarely in anyone’s plan when they think about how to retire, but even planning to work one extra year makes a significant difference in expected income and lifestyle. Working longer means earning more income, giving you more time to save and reduces the number of years that you will have to support yourself without earned income.
Re-balancing your retirement accounts is also a good idea at this stage. Unless in previous years you had a long time frame to make up lost income, it’s now a good idea to lower your exposure to risk in the stock market.