A soon-to-be-released report from the Deloitte Center for Financial Services reveals the nation’s dire state of retirement readiness — and, on top of that, how deflated so many people feel about the prospects of their future getting better:
- Although saving for retirement is a top priority, 58 percent of those surveyed said they don’t actually have a retirement plan.
- One in five say they will rely entirely on Social Security to provide their retirement income.
- Nearly 40 percent believe that no matter what they do with their money, they won’t be able to generate the income they want when they retire.
Yet despite people’s grim outlook for their retirement prospects, few trust financial professionals to help them, instead preferring to handle their money on their own.
Don’t give up just yet: You can take charge of your finances in ways that can make a big difference in retirement. Here are the three key areas where you can squeeze out more money to cover your retirement living expenses.
1. Make The Most of Social Security. Social Security seems simple on its face, but choosing the best strategy for taking advantage of the entitlement is complicated, especially if you have other family members depending on your benefits. In general, the longer you wait, the bigger your monthly checks will be. Moreover, waiting can boost not only your income but also the benefits your spouse can receive, both in spousal benefits during your lifetime and after your death in survivors’ benefits.
To do: Visit the My Social Security website where you’ll get good information about what your benefits will look like, along with information to help you choose the best time to start taking your benefits. (Here are other strategies to follow to get maximum value from Social Security.)
2. Get Better Investing Returns. In the current environment of rock-bottom interest rates, you can’t expect no-risk bank products like CDs to give you the income you need in retirement. These days, you have to understand how different investments provide income, including bonds, stocks, and specialty investments like real-estate investment trusts and master limited partnerships.
To do: Understanding portfolio income doesn’t mean you have to invest in all of these different things. Often, a simple combination of stock and bond index mutual funds or exchange-traded funds is all you need to produce both the income you need and the growth to meet rising costs.
3. Take Advantage of Other Financial Resources. Beyond Social Security and your investments, many retirees have few or no financial resources to tap into after they quit their jobs. Having to go back to work during retirement is not only unpalatable to most retirees but also difficult to do in this economy, in which millions of underemployed and unemployed individuals are fighting for job opening.
To do: You may not even have thought about some of the resources that may be available to you. For instance:
- If you had a retirement plan at a former employer, check to find out how to draw benefits from it, either directly from the plan or by rolling over the proceeds into a retirement account of your own.
- For low-income retirees, government assistance can help you make ends meet. Medicare and Medicaid coordinate to provide health benefits, while other programs can provide assistance with food and utility bills. Contact the agency in your state or local government that handles financial assistance for more details, as they can vary dramatically from place to place.
- If you own your home, you may be able to draw income from your home equity. A reverse mortgage is one option, although it can often involve considerable fees.
- Private assistance can also cut your costs. Drug companies often offer medications at lower cost to those in need, while even simple senior discounts can produce big savings.
Living on a fixed income is challenging, but it’s not impossible. Rather than giving in to despair, focusing on these keys will help you come up with the income you need for a better retirement.
Photo Credit: Alamy