So you’ve crunched the retirement numbers and they aren’t quite working.
What’s next? If your income is falling short of your expenses or you’re nervous about your long-term financial situation, there are several options you can consider for maximizing your retirement income.
- Work longer — And not necessarily at your old job, though that may be an option. Many retirees get satisfaction from moving into new lines of work or starting their own business. It can augment income, provide structure and allow for new opportunities.
- Delay collecting Social Security — If you’re eligible for Social Security, you can start collecting benefits at age 62. But if you start taking benefits before you’ve reached your full retirement age, your monthly benefit check will be 25% to 30% less. In terms of getting the most out of Social Security, waiting longer means your monthly checks will be larger for the rest of your life..
- Manage expenses — Create a budget so you can track expenses and if need be work with a financial professional to calculate how much of your retirement income is taxable, partially taxable and income tax free. This will help you avoid overspending early in retirement, which could put you in a bind later on.
- Create a withdrawal strategy — Decide how much you can withdraw from your savings each year and prioritize withdrawals from taxable, and tax-deferred accounts.
- Be tax savvy — Combining withdrawals from tax-deferred accounts like 401(k)s and traditional IRAs with tax-advantaged accounts like Roth IRAs (in which contributions are made with after-tax money) can help you to manage your taxable income.
- Diversify — Retirement doesn’t mean you’re at the end of the line – far from it, in fact. It’s still important to make sure your investment portfolio provides the potential for some long-term growth along with seeking stability of principal.
- Tap into your nest egg — But as you start selling off investments and reinvesting, be sure to rebalance your account regularly so that it stays in line with your long-term financial goals. Remember to talk with a legal advisor and tax consultant before making investment-related decisions.
- Evaluate the cost of your home — You might have paid off your mortgage. But have you thought about how much it costs to maintain your home? How much are your property taxes? What about major repairs like a new roof or replacing the furnace? If your retirement income is falling short, maybe now’s the time to consider downsizing to a more manageable home.
Be proactive
Consult with a financial professional to help keep you on track, and continue to refine your goals and make adjustments to your retirement income strategy as the years go on. The above are just some of the ways to help your money go the distance with you.