Retirement could end up being a costlier prospect than expected. You might think you’ll get by spending only half of what you did when you were working, but in fact most older people end up needing around 70% to 80% of their old income to maintain the same standard of living.
A big reason for this comes down to having a lot of time to fill. When you work, you stay busy for eight or more hours a day (assuming you work a typical full-time schedule). Once that job is gone, you’ll need something to do — and that something, whether it’s golf, travel, or adopting a series of pets, could end up costing you dearly. dear.
That’s why it’s so important to approach retirement with a good amount of money in savings. But what if your senior years are approaching and you have already missed this opportunity?
In that case, it’s definitely worth considering extending your career a bit and growing your 401(k) or IRA while you can. But if that still doesn’t work, there’s a social security move that’s definitely worth making.
Let a higher benefit offset lower savings
The social security benefit to which you are entitled during your retirement depends on your lifetime salary. And you can collect this benefit in full once you reach full retirement age, or FRA, which is 66, 67, or somewhere in between.
But here’s the neat thing about Social Security – it will reward you handsomely for delaying your filing. For each year you delay taking Social Security after FRA, your benefits will increase by 8%.
Once you hit 70, that incentive wears off. But if your FRA is 67 and you delay filing until age 70, you can give your monthly benefit a permanent 24% increase. It’s a great way to make up for any shortfall in savings.
Of course, delaying applying for Social Security until age 70 could also mean having to work until age 70. And that may not be ideal.
But one option you have is to see if you can switch to part-time work. You may find that partial pay does the trick to pay your bills while you wait for Social Security, especially if you’re doing your best to maintain a frugal lifestyle during this time. Or you could potentially rely on your part-time salary and modest withdrawals from your retirement plan (although ideally you’d leave your nest egg alone a bit longer in this situation).
Don’t risk a shortfall
Many seniors are shocked to learn that retirement is costing more than expected. If you know that when you retire you don’t have a lot of savings, then it’s definitely worth delaying your Social Security filing for as long as you can. Once you increase your benefits, you are guaranteed a higher monthly salary for life. And that’s an important thing when you’re retiring and you’re already low on funds.