Retirement: Saving in the home stretch
If you’re ready to retire, but your nest egg isn’t, you’re not alone, said Walter Updegrave in Money.com. Fewer than 1 in 4 Baby Boomers think they will have enough money to last through their retirement, according to a recent study by the Insured Retirement Institute. That’s “not surprising” considering that the median 401(k) balance for 55- to 64-year-olds is less than $72,000. The good news is that it’s not too late to shore up your retirement prospects, even if you’re approaching the end of your career. Even starting from scratch, a 50-year-old worker who puts away roughly $500 a month could save as much as $144,000 by age 65, assuming a 6 percent rate of return. That won’t beat an entire career’s worth of 401(k) contributions, but it’s better than entering retirement “with little or no savings and only Social Security to fall back on.”
One thing is for sure: “Your retirement will be different from your parents’ retirement,” said Kenn Tacchino in Market Watch.com. Once upon a time, financial advisers referred to retirement as a “three-legged stool,” supported by Social Security, employer-sponsored plans, and personal savings. All three “legs” are still important to any retirement strategy, but these days, the “analogy does not do justice to the variety of resources needed” to fund a comfortable post-work life. Instead, “it’s time to replace the retirementincome stool with the retirementincome ladder.” That means drawing on diverse sources of income for support. One of the rungs on your personal retirement ladder might be working a part-time job, or negotiating a phased retirement with your employer. Your home should be another key part of your strategy, whether that means renting out a room for extra cash, downsizing to save on expenses, or taking out a reverse mortgage to provide another income stream.
“Working just one extra year can make a big difference in your retirement savings,” said Christy Bieber in CNN.com. If you have a $350,000 nest egg and earn a 6 percent return, waiting a year to draw on your funds translates into $21,000 in gains, even if you don’t contribute another penny. Wait five years, and your savings could grow to more than $468,000. But don’t forget that every retirement strategy is subject to the whims of the market, said Gail MarksJarvis in the Chicago Tribune. Even if your 401(k) looks healthy, you can’t count on average annual gains. “The key is to think at the outset of retirement whether you would have enough in Social Security, pensions, or maybe annuities or money from a temporary job to cut back spending in a tough period.” Then, you can take the leap.