According to human resource firm Hewitt Associates, the average retirement balance for employees participating in 401(k) plans was $68,000, a 14% decline from 2007. For many that won’t be enough. Thus the so-called golden years may not be as golden as planned. Rising health care costs and a shift in corporate benefits may make it difficult to maintain current living standards upon retirement. But there are steps that, if taken now, can pay off for years to come.
Social Security
First, consider delaying social security benefits if possible. Instead of applying for social security once eligible, delay those benefits. Maximize the effects of compounding for a larger monthly check when finally tapped.
Stock/Bond Ratio
Second, rethink the portfolio’s stock/bond ratio. Conventional wisdom suggests a bond percentage equal to age. For example 60% bonds and 40% stocks for a 60-year-old and a 75% bond - 25% stock mix for a 75-year old’s portfolio. But as life expectancy increases, portfolios must offer growth as well as income in order to last longer. Consider taking on a bit more risk to get more return, which means more stocks than the old ratio might suggest.
Curb Spending
Spending is the other side of the equation. Look for easy ways to reduce monthly outlays. The less needed to live on, the longer money will last. How much is needed for a comfortable lifestyle? Comfort zones vary for different wallets.
Downsize
Many Empty Nesters have already taken the first step by downsizing to a smaller, less costly home. The difference in monthly mortgage payments can be invested to provide future income. There is also a shift away from expensive suburban living called Naturally Occurring Retirement Communities, or NORCs. Convenient public transportation and free cultural events have lured many retirees back to the city and reinvigorated cities across the nation.
Bargain Hunt
Deeper cuts may be more painful yet save hundreds of dollars each month. Get the most bang for the buck. Shop for bargains when considering the cost of phone and cable service plans. Are the monthly dues justified for infrequent use of health club memberships? Consider cultural events at local senior centers, libraries, municipal or religious centers for free or nominal fees.
Think of retirement years as a second act. Many retirees get great pleasure from turning a hobby into a part-time job that pays. Consider investing as much of that part-time pay as possible. Even a small amount of extra cash can multiply overtime.
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