Half of American boomers risk running out of money in retirement — here are 3 ways to avoid becoming part of that statistic
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Baby boomers may be in trouble when it comes to retirement.
A recent Morningstar study found that 52% of boomers risk running out of money during their later years, more than other generations. This is partly due to the short time they have left to save, and their small account balances.
Morningstar’s analysis suggests boomers (and Gen Xers) got caught in the transition between defined-benefit and defined-contribution–dominated systems. Additionally, most Boomers didn’t grow up in a 401(k) world and, without modern-day incentives such as auto-enrollment, their savings fell short.
Whatever the reason, many boomers are now facing a rough retirement. But all hope is not lost. If you’re worried about emptying your accounts too soon, here are three ways to beat the odds and live a more comfortable retirement.
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1. Delay retirement for a few years
If you’re nearing retirement with too little invested, working longer is the most obvious solution. Staying in the workforce longer can improve your future financial security in the following ways:
*You’ll have more time to save money *You can delay claiming Social Security, which increases your benefit *You won’t need your savings to support you as long
Let’s say you’re 63 years old. If you can put off retirement until 67, you’ll be able to claim your Social Security at the full retirement age and ensure your standard benefit isn’t reduced by early filing penalties.
You’ll also have another four years to save. If you can manage to put away around $10,000 a year during that period (including your employer match) and earn a 7% average annual return, you could grow your account by approximately $44,000. That’ll give you another $1,700 per year in annual income, which isn’t nothing.
In addition to relying on Social Security, building up retirement accounts like a Roth IRA or 401(k) allows you to contribute after-tax dollars, with the added benefit that investment gains and withdrawals are tax-free.
This provides flexibility if your retirement plans change. One specific IRA to consider is a gold IRA, which you can establish with the help of Rosland Capital. Diversifying with assets like precious metals, which have a low correlation to stocks and bonds, can further stabilize your portfolio.
By opening a gold IRA, you can combine the tax advantages of a traditional IRA with the inflation-hedging properties of gold. As an authorized dealer for the U.S. Mint, Rosland Capital can assist you in growing your retirement savings. If you think this might be the right option for you, request a free information kit to learn more.
If you can work until age 70, you’ll fare even better. You can boost your standard Social Security benefit by 24%, earning delayed retirement credits if you claim after reaching your Full Retirement Age (FRA). Additionally, by investing $10,000 annually over seven years, you could add over $85,000 to your nest egg.
If you need guidance on the best time to retire and the most effective saving strategies, consider speaking with a professional at Zoe Financial.
With Zoe Financial, you can connect with a trusted financial professional who will develop a plan tailored to your specific needs. Their network includes fiduciaries, financial advisors, and financial planners who can advise you on growing your nest egg, making smart investments, and determining the best time for you to start collecting Social Security.
Getting started is simple: answer a few questions about yourself and your finances, and their algorithm will match you with your top three advisors. From there, you can schedule a free, no-obligation consultation to ensure you’ve found the right fit.
Read more: These 5 magic money moves will boost you up America’s net worth ladder in 2024 — and you can complete each step within minutes. Here’s how
2. Cash in your equity
Many Boomers are coming up short in their retirement accounts, but are rich in real estate. This generation collectively owns homes with a combined value of $18 trillion, according to Redfin.
If you own your home outright or even have a lot of equity, you may be able to sell and buy a cheaper home with cash (to avoid today’s high mortgage rates), thereby adding a large lump sum to your retirement funds.
In theory, you also have the option to take a reverse mortgage. This would allow you to tap into equity without having to move out of your home. However, reverse mortgages often come with high fees, which can make it difficult to leave your family home to loved ones. They are not the best choice for most retirees, so be sure to explore your other options before considering one.
If buying property is out of reach for you right now or you don’t want to use your own equity, there is still a way to invest in the appreciating equity of U.S. homeowners in some of the biggest markets in the country.
One way to invest in these competitive markets is throughCityfunds, a platform that allows you to invest in own-occupied properties in top U.S. markets.
Cityfunds allows investors to tap into the housing market in major U.S cities including Miami, Los Angeles, and Austin. Cityfunds secures an interest in a home’s future value in exchange for cash. That means, as the home’s value appreciates, your Cityfunds equity investment grows alongside the homeowner’s, all while diversifying your investment portfolio.
With a community of over 10,000 users, you can get started with a minimum investment of $500 – without the hassle of dealing with high property prices or an expensive mortgage.
rentals in retirement
If you want to keep your home but need a little extra cash flow, consider renting out a room or even taking a more creative approach, such as signing up for apps that allow you to charge people for borrowing your swimming pool or storing stuff in your garage.
Even if you don’t have any of these amenities, there are still ways to invest in real estate, without having to purchase a property outright.
With rising home prices and high interest rates, purchasing a home can be out of reach for many. However, if you’re interested in generating income from real estate, there are alternatives. One option is investing in shares of vacation homes and rental properties through platforms like Arrived.
A LendingTree survey shows significant rent increases in prime real estate markets like New York, Miami and Phoenix — and you don’t need to buy property to tap into them as an investor.
Backed by world-class investors like Jeff Bezos, Arrived offers an easy way to invest in income-generating real estate without the hassle of being a landlord. You can browse their selection of vetted rental properties, chosen for their potential appreciation and rental income.
You can start investing with as little as $100, making it a simple way to tap into the rental market without buying and managing a property.
3. Be strategic about where you retire
Finally, if you’re worried about making a small nest egg last, consider retiring to a more affordable location.
Some areas are far less expensive to live in than others. Some locales also have more favorable tax rules for retirees, including no taxes on pensions or Social Security benefits. By reducing your living costs, you can preserve your savings by using less money each year.
No matter where you choose to retire, one effective way to cut costs is by reducing essential expenses like home and auto insurance. While insurance is necessary, it doesn’t have to consume a significant portion of your budget.
For home insurance, platforms like BestMoney allow you to compare rates in your area. Simply answer a few quick questions about yourself, and they’ll instantly sort through leading insurers to find the best deals available.
Similarly, OfficalCarInsurance makes it easy to find better auto insurance deals. When you sign up, you’ll receive offers from trusted companies like Progressive, GEICO and Allstate, making it easy to find and select the right policy for you.
In addition to cutting down on essential expenses, you can further stretch your retirement savings by making your money work for you. One simple way to do this is by investing your spare change, turning small contributions into potential long-term growth.
Acorns is a user-friendly, automated savings and investing app that lets you invest your spare change effortlessly. The app simplifies saving and investing by rounding up your everyday purchases to the nearest dollar and investing the spare change into a diversified portfolio of ETFs.
Acorns also offers a subscription tier with added perks, including a 3% IRA match on contributions held for four years and a 3% APY on checking accounts. Plus, if you set up direct deposit, your monthly subscription fee is waived.
If you sign up with Acorns today, you’ll receive a $20 bonus to kickstart your investing journey.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
