You probably have a picture in your mind’s eye of what retirement will look like. Maybe you want to spend as much time as possible traveling, or you want to enjoy lazy days with your grandkids, or perhaps you hope to find and perfect a new hobby.
It’s wonderful to dream, but are you balancing that dream with reality? Many people fail to make the proper financial arrangements for when they hit 65 and over. That can cause those dreams to evaporate, replaced with worry over how they can maintain their current living standards much less get ahead.
A new study from the Schwartz Center for Economic Policy Analysis at the New School finds that 40 percent of Americans ages 50 to 60 who consider themselves middle class are at risk of falling near the poverty line when they get to 65. They will have much less retirement income than they currently enjoy while they work.
This means two in five Americans will become downwardly mobile when they hit retirement.
What Does It Mean to Fall Below the Poverty Line?
This doesn’t necessarily mean you can’t handle your bills, depending on how much you have saved. But here are some statistics culled from the study relating to people ages 50-60 that should grab your attention:
8.5 million will fall below twice the poverty level if they retire at 62, making less than $31,260 for couples and $23,340 for singles.
2.6 million of those will have incomes under the poverty level, which is $15,730 for couples and $11,670 for individuals
If you are single, you retire at 62 and you currently make $25,000-$64,000 per year, your income after retirement will dip to $18K.
Couples who currently make $44K -$105K and retire at 62, your income will drop to $29,500
What Can You Do to Avoid Downward Mobility?
If you haven’t given a lot of thought to retirement beyond minimal contributions to a 401(K), here’s the good news — no matter how old you are, it is never too late to start planning.
While you may have to tighten your belt for a while, you can still save enough to put you even or even ahead for retirement. You want to have more money to redirect to your retirement account so you can maximize that investment before you get to your mid-60s. Here are a few ideas to get you started:
Cut back on expenses: Do you really need to pay for cable each month? Can you cut out a few dinners out? You can save $100 to $200 more per month simply by making small changes.
Work a second job: At 50, you are still young enough to have the energy for extra work. Add a part-time job to your timetable or, if you are married but one of you stays home, have that spouse go to work. You can save everything you make.
Wait to file for Social Security: The longer you wait on this, the higher your benefits will be.
Still not sure how you can get ready for retirement in time? Consult with Jay at Go Comp to get real answers you can use to make retirement more comfortable. Get in touch with us today.