Will you have enough money for your retirement? This is a major concern facing many Americans, as retirement looms closer on their financial horizon. If you’re facing a retirement shortfall, you’re not alone. Many American households may retire on less annual income than they may need to live comfortably during their “golden years.”
Guidelines for retirement planning recommend that you may need at least 60% to 80% of your pre-retirement income to maintain your current lifestyle. The following steps may help you get a clearer view of your retirement finances, and may help you identify any needed adjustments to your savings strategy:
- Project a retirement budget, taking your current standard of living into consideration. How will you meet future medical expenses, housing costs, travel, and entertainment? Answering this question can give you a target for your budget.
- Review your financial assets to see if they will meet your retirement needs. Be sure to consult your qualified financial planning professional annually to determine if your assets are on track for the retirement lifestyle you envision.
Remember to include all your resources on your balance sheet. Some of these untapped sources may be:
Home Equity. If you sell your home, the Internal Revenue Service (IRS) allows you to keep up to a certain dollar amount of capital gains tax free, which you can then use to boost your retirement savings, provided you have owned and occupied the residence as a principal resident for an aggregate of at least two of the last five years before the sale.
Highly-Appreciated Non-Income-Producing Assets. With careful financial planning, you may be able to convert non-income-producing assets, such as stocks or real estate, into income-producing assets.
Valuable Collectibles. Specialty items, such as estate jewelry, antiques, and stamp, coin, or doll collections, may be converted into cash, but only if you’re willing to relinquish them at some point. Evaluate what these valuables may be worth to you in your retirement years and seek the services of a professional appraiser, if needed, for an accurate appraisal of items.
- Consider moving to a more affordable locale that could potentially free up additional retirement capital by lowering your cost of living.
- Consider delaying your retirement. Each additional year you wait to retire will help reduce your budget shortfall. In addition, working longer will give you an added opportunity to increase your savings.
The way to handle a potential retirement shortfall is to plan carefully and begin acting now. Once you have determined your strategy with a financial planning professional, implement it. If you start now, your golden years may turn out just as you have planned.