When you blow out your candles on your 60th birthday, you will be tantalizingly close to the traditional retirement age – 65. Of course, traditions change, and many Americans are reaching this important milestone with big financial worries. According to the Federal Reserve, the median retirement savings for Americans ages 65 to 74 was just $148,900. This is not a lot of money if it is expected to finance your needs for another decade or two (or three)!
(Learn how to make up for lost time when saving for your retirement.)
The retirement landscape is changing as we continue to live longer, receive fewer pensions, and face the constant threat of big changes to Social Security payouts. That means planning and flexibility are more important than ever, especially as retirement approaches.
Finalize your retirement plans.
With retirement in sight, it is time to sit down and plan out your expenses and expected retirement income sources. You can see how much you have in your retirement savings account, and you should be able to calculate how much you can expect in Social Security payments, as well as any pensions you are entitled to.
Now, look at your expenses. Do you still have a mortgage or car payments? How much do you typically spend on groceries, and what are your monthly utility bills? Do you want to take a vacation each year during retirement or even rent a summer or winter home?
You should be able to start calculating whether or not your retirement savings and income will be able to cover your expenses and get an idea of what your retirement will look like. Before you leave your job, make sure the timing is right, and you’ll be able to comfortably support yourself during retirement.
Plan before withdrawing your retirement savings.
Before you start withdrawals from your 401(k) plans and IRAs, consider all relevant factors. When you begin withdrawing money, your account growth will slow, because you will have less principal earning interest.
It is imperative that you don’t drain those funds too quickly! (Learn how to Stretch Your Legacy.) Of course, none of us can predict how long we will need our money to last, so it’s smart to bet on yourself living a long life. Better to keep a little money in savings that you can pass onto your heirs than to run out while you still need it to pay the bills!
Be willing to be flexible.
As the concept of retirement changes, we must change and adapt with it. Americans are living long than ever, which means we must make our savings last. It also means that many of us will enjoy more healthy years where we can potentially work part time to help supplement our income and slow the need to make withdrawals from our retirement accounts.
If your savings are not where they need to be, consider working part-time for the first few years of your retirement. This can be a great opportunity to learn a new skill, turn a passionate hobby into a job, or see a new part of the country! It is better to work now than to find out late in retirement, when your health may not permit you to work, that you have run out of retirement savings.