Most Americans aspire to live until they reach the age of 100, but unfortunately, only 3 out of 10 can afford a retirement lasting more than 20 years. This reality has raised concerns about financial security during the golden years for many retirees. A recent survey conducted by Edward Jones in collaboration with Age Wave has revealed that only 30% of Americans are confident that they can afford a retirement that lasts more than 20 years. However, a surprising 69% of the participants expressed their desire to live up to 100.
To bridge the gap between retirement aspirations and financial realities, retirees have identified five key “course corrections” that have helped them thrive financially during their retirement years. These course corrections are beneficial not only for retirees but also for those still in the workforce.
Here are the five steps to enhance your financial security in retirement:
#1 Reduce or eliminate debt:
Having debt can greatly affect your capacity to save for retirement and enjoy a comfortable life during this stage of your journey. The most common financial course correction identified by retirees is to reduce or eliminate debts, including mortgage and credit card debts. Retirees gain better financial security and control over their resources, enabling them to fund essential expenses and even pursue long-awaited dreams like owning a vacation home or spending quality time with family through vacations and gifts.
Here are some steps to consider:
- Pay more than the minimum on high-interest debts and aim to eliminate them.
- Consider doubling up on mortgage payments to reduce the principal balance over time.
- Prioritize paying off higher-interest debts, such as credit cards.
- Think about downsizing to a smaller home and using the extra money to pay off debts.
- Use bonuses and raises to chip away at credit, car loans, and other outstanding balances.
#2 Save as much as possible during your working years:
Saving diligently during your working years is crucial to funding a lasting retirement. The power of compound interest can exponentially grow your savings over time. Yet, the Edward Jones survey found that only 37% of pre-retirees saved as much as possible during their working years, highlighting the importance of this step.
Here are some steps to consider:
- Start saving for retirement as early as possible.
- Contribute to employer-sponsored retirement plans like a 401(k) to benefit from tax advantages and potential employer matches.
- If your employer does not offer a retirement plan, you should consider opening an Individual Retirement Account (IRA). This will provide you with tax advantages on your savings.
#3 Obtain supplemental health insurance:
Retirement can bring about significant financial strain due to the costs of healthcare. Basic Medicare doesn’t cover many of these expenses, which can add to the burden. Supplemental health insurance, commonly known as “Medigap” policies, can help bridge the gap and reduce out-of-pocket healthcare costs.
Here are some steps to consider:
- Explore Medicare and Medigap coverage options to find the best-suited plan for your needs.
- Considering long-term care insurance is a wise decision to ensure coverage for expenses that may not be covered by regular health insurance. This encompasses both assisted living and nursing home care.
#4 Follow a financial plan and budget:
Developing and following a financial plan and budget can help ensure financial stability during retirement. This plan should encompass various aspects of your financial life, including investments, taxes, estate planning, and risk management.
Here are some steps to consider:
- Collaborate with a financial planner to establish a personalized financial plan that caters to your situation.
- Use budgeting tools like spreadsheets, websites, or mobile apps to develop and stick to a budget.
- Review your financial plan and budget to stay on track and make necessary adjustments.
#5 Seek support from government and social services:
Many retirees qualify for government and social services that offer food, medicine, and housing assistance. However, many retirees fail to take advantage of these beneficial programs.
Here are some steps to consider:
- Access public benefit guides available by the state to determine eligibility for relevant programs.
- Reach out to local senior centers to learn about available support services.
Retirees can enhance their financial security by taking these five-course corrections and enjoying a fulfilling and prosperous retirement. Whether you are already retired or planning for the future, implementing these steps can lead to a more financially stable and enjoyable retirement journey.