The National Retirement Risk Index at the Boston College Center For Retirement Research determined that 53 percent of American households are at risk of not having enough savings to maintain their standard of living after retirement. That’s up from only 31 percent in 1983—and, it represents the first time in modern history that younger generations will have it worse at retirement than their parents and grandparents. Workers approaching 60 need to take an honest look at their financial situation and make some important decisions to ensure the most relaxing, comfortable lifestyle after they retire.
Maximize Social Security
The average age of retirees today is 62, according to a Gallup poll released in April. This is also the age at which you first become eligible to start collecting Social Security payments. But just because you can do something doesn’t mean you should, and that couldn’t be more true as it pertains to Social Security.
Full retirement age for those born after 1960 is 67 years old. That means you are eligible to start collecting Social Security at age 62, but the monthly benefit will be reduced incrementally the earlier you start. For instance, the payments are decreased by 30 percent if you start at age 62, 25 percent at 63, 20 percent at 64, etc.
Able-bodied individuals should continue working for as long as possible, particularly if your job is fulfilling. The maximum Social Security benefit for those at full retirement age is $2,642 per month in 2014. That number would be $1,849 if you retired at 62.
Do the Math
Workers approaching retirement should use the three Es to assess their current financial situations: essentials, entertainment and emergencies. The first includes your mortgage payment, utility bills, food, etc. The second E is all the things you plan to do as a retiree, while the last one is your nest egg for financial challenges and what will ultimately be passed down to your children.
To maintain the same lifestyle after retirement, you need enough income to cover all the aforementioned minus Social Security and any 401(k) and IRA payments. You can estimate your Social Security benefit by signing up for an account on the SSA website to track your earnings and estimate how much you will get upon retirement. If there is a shortfall in the math, start making adjustments now.
Avoid taking on anymore unnecessary debt and pay off credit cards and auto loans as quickly as possible. Those currently receiving monthly payments from a structured settlement or annuity should consider selling their future payments for a lump sum of cash now. You could then use this money to help pay down your current debts, significantly reducing your financial obligations in the future.
Outside the Box
A group of retirees called NOMADS—an acronym for Nomads On a Mission Active in Divine Service—have no mortgage payments or any other debt to speak of. These individuals spend their retirements traveling the country in their RVs volunteering at national parks, nonprofits and for community projects. Barbara Traynor, a 72-year-old NOMAD, told CNN she gets free room and board volunteering for nonprofits from Florida to Alaska.
Living on the road is an option for anyone with a sense of adventure. Sell your house and buy a home on wheels you can take anywhere with pavement. Whether you decide to volunteer like the NOMADS or just travel from state to state is up to you. Either way, you can expect an almost-stress-free retirement complete with travel and entertainment.
What constitutes a successful, fulfilling retirement varies from person to person. It’s a long journey but once you get there, your years of preparation will pay off.