1. Downsize to a smaller home to save money.
2. Move to a cheaper market or area where they offer: no state income tax, benefits are not taxed and retirement income is not taxed such as Florida or Nevada, Alaska, South Dakota, Texas, Washington, Wyoming, New Hampshire and Tennessee.
3. Move overseas to Panama, Costa Rica and some South American and European countries where the cost of living is cheaper.
4. Move to a rent controlled building or a small apartment to save money each month.
5. Rent out a room in your home to generate extra income.
6. Move in a shared home with other elderly to save money.
7. Move to an area where there is more transportation options to save money on auto maintenance and repairs.
1. Calculate the total needed. Determine how much you need to save monthly to meet your retirement goals.
2. Use technology to automate your retirement contributions either through your employer, automatic paycheck deductions or use online banking.
3. Maximize tax deductions and credits to minimize tax liabilities.
4. Consultant a financial advisor to ensure that you meet your retirement goals.
5. Increase retirement contributions with each salary increase.
6. Save at least 20-30% towards retirement each month to ensure you contribute enough to your retirement account.
7. Contribute the maximum for employer matching. This is free money that will help you reach your retirement goal quicker.
8. Open a separate IRA if you are not on target to meet your retirement goals with your 401K or have maxed out your 401K. If it better to have more money in your retirement account than you need than not enough.
9. Take advantage of catch-up contributions that allow you to contribute additional money to your 401K plan for employees age 50 or older.
1. Perform an asset reallocation yearly to rebalance your portfolio or when a major life event occurs, reconfirm your risk tolerance and diversification and ensure you remain on target to meet your retirement goals.
2. Diversify your portfolio to spread investments over multiple asset classes to minimize losses and maximize gains.
3. Control your risks by investing in various mutual funds that are a combination or low, medium and high risk to limit your losses.
4. Invest in Dividend Reinvestment Plan (DRIPs) to offset investment losses you may have experienced.
1. Apply for reduced real property tax programs for the elderly. Many elderly lose their homes due to unpaid real property taxes.
2. Apply for reduced utility programs for the elderly. Many elderly go without utilities because they can no longer afford to pay their utility bills.
3. Ensure your homeowners warranty is up-to-date. Home repairs can range from hundreds to thousands of dollars per repair and may lead to usage of credit cards if you cannot afford to pay for the repairs on your fixed income.
4. Ensure you have adequate coverage for health, life, homeowners or renters, auto, disability, and long-term care. Lack of adequate insurance coverage can lead to high unexpected costs that may cause you to go into debt. One of the main reasons elderly file for bankruptcy is due to healthcare costs.
5. Create an emergency fund to cover expenses for 12-24 months. Lack of an emergency savings fund or account may lead to usage of credit cards causing a retiree to go into debt or use risky financial.
1. Reduce retirement plan fees by investing in no load funds or low fee funds that reduces eroding of returns on investments over time.
2. Review your Social Security benefits, review options on when to withdraw social security and review with your financial advisor to include in your financial plan.
3. Postpone retirement as long as possible.
4. Delay social security or other benefits. Draw your social security benefit or other benefits at full retirement age to get the maximum amount you are entitled to receive.
5. Invest in tax free investments such as a tax free ROTH IRA account to prevent paying taxes during retirement. Maximize tax deductions and advantages. Also consider investing in tax-free municipal bonds.
6. Consider a phased retirement by slowly reducing your work hours until you retire. During the first few years of retirement consider getting a part-time job to further delay benefits.
1. Perform estate planning and create a will, trust and advanced medical directive. Update the documents yearly.
2. Create a home repair fund with enough money to cover home repairs for 6-12 months.
3. Create a budget or spending plan to track spending daily, weekly or monthly so you know how much you earn, spend and owe.
4. Scale back expenses at least 1 to 5 years prior to retirement to reduce spending by 30% – 50%.
1. Invest at a minimum 40% stocks, 60% bonds/cash (distributed with multiple assets classes (equities (stocks), fixed-income (bonds) and cash equivalents (money market instruments). As you get closer to retirement 5-10 years from your retirement date switch investments to 60% bonds/cash and 40% stocks.
2. Invest across stock categorizes (large cap, mid-cap, small).
3. Invest in mutual funds that have at least a 5% return.
1. Know the laws in your state for Social Security, Veteran’s Benefits and taxes.
2. Consider where you want to live, what lifestyle you want to have, your health condition, cost of living, and other expenses during retirement and plan for those items.
3. Do not loan money to family or friends or pay for items for family or friends that are not in your budget.
4. Pay off your mortgage. If you have 5 years or less on your mortgage or are close to retirement pay it off. You loss the mortgage tax deduction because it is no longer a tax benefit. This will minimize the amount of debt you owe during retirement.
5. Keep debt at 15% or less of your monthly income after taxes. Pay off loans and credit card debt. Avoid making large unless you know you will be able to pay the debt prior to retirement.
1. Consider your health. If you are in fair or poor health, pay for prescriptions, co-pays or other medical expenses you need to save for retirement to cover those costs.
2. Consider employer impacts – when productivity rates decline it negatively impacts the economy, increases government budget pressures and reduces funding for programs for the elderly.
3. Consider the new retirement age which shortens retirement for lower income retirees who may die sooner than higher income retirees.
4. There may be fewer jobs available for older workers or older workers may be forced to retire sooner than expected which decreases the amount of money available to contribute to retirement.
1. Provides a guaranteed income for life.
2. There is no annual fee.
3. Can purchase in one lump sum or with a series of payments for life.
4. Contributions are tax-deferred so taxes are paid only on the money you withdraw and you are only taxed on the earnings.
5. Proceeds from annuities or at least the principal pass directly to your beneficiaries without the delay and expense of probate court.
6. Can decide when you want to withdraw the money.
7. Can contribute as much as you want, up to the limits imposed by the insurer.
8. Good option if you plan to live at least seven years past your retirement age.
1. Capitalize on tax-deferred contributions and earnings on traditional retirement plans.
2. Take advantage of tax-free withdrawals for qualified distributions from Roth IRAs.
3. Choose among different asset classes and investment vehicles.
4. Provide the ability to borrow from your plan under certain circumstances.
5. Contributing to a retirement plan lowers the amount of income you have to pay taxes on.
1. You discussed the plan with your spouse and a financial advisor
2. You live a modest lifestyle
3. You are willing to move to a less expensive area
4. You are willing to downsize your lifestyle
5. You have adequate insurance – health, life, disability, long-term care, auto, homeowners
6. You have an emergency fund to cover monthly bills and expenses for 12-24 months or more
7. You spend less than you earn
8. You will have additional sources of income if needed – part-time job, self-employment, pensions, trust, whole life insurance, etc.
9. Your estimated monthly taxes, medical costs, and living expenses will be at least 10% less than your monthly retirement income