Don’t Grow Broke In Retirement—Top 5 Tips You Must Know

We all want to enjoy our retirement after working so hard for decades. But the actual scenario is quite different. According to financial experts, most Americans can’t even secure their savings for more than three years.

In September 2020, a Federal Reserve study found that the median savings in retirement accounts in the U.S. were just $65,000. Government data indicate that households headed by seniors 65 or older spend about $47,600 each year on average.

So, how should you plan your retirement? Well, don’t worry. This article will guide you with the top five easy steps you can apply to avoid growing broke in retirement and live in popular communities like the Riverview retirement community

1. Have a look at your finances

It’s time to take a close look at your budget. It is necessary to compare the amount you are spending and saving. Try to cut down your budget on unnecessary things and invest more in the savings account.

Do you have a home and want to spend your retirement life there? Well, according to financial experts, make sure you pay your mortgage 1before planning to take a permanent break from your work. Refinancing your mortgage is a good idea to save a lot of money monthly and get rid of the home loan quickly.

2. Keep an emergency fund

Keeping an emergency fund for about three to six months’ worth of your living expenses is good to stay in a safe zone. And it is even better if you can manage to save an emergency fund for around three years. 

Yes, in that case, you don’t need to withdraw from the retirement accounts if the market collapses for any reason.

With this substantial emergency fund, you can deal with the crisis until it’s safe again to take out your money from the retirement account.

3. Downsize the home

If you want to make your retirement safe and secure, downsizing your home is a good way to save dollars for the future. A big house takes up lots of unnecessary spaces you don’t need. So, what is the solution? 

Instead of waiting for years, you can sell it now. And by investing the profits, you will get more interest than what you will get in your 60 or 70.

However, you might think about parting your family home or if you have any emotional attachment to it. But smaller homes are easy to run, and cost less than your larger ones.

4. Go for Roth IRA

What can be better than avoiding the tax while taking money out of your retirement account? Yes, this is possible with a Roth IRA account2.

You don’t have to worry about deductions when withdrawing funds from a Roth account because contributions are made after tax. And on the other hand, traditional IRAs do not impose a tax when you contribute. So, you will end up paying later.

Many banks and brokerages offer these types of accounts. And if you still don’t know how to make an investment decision, you can take help from your advisors. They will help you manage retirement accounts according to your financial situation.

5. Keep a good eye on your investment portfolio 

If you are a person who follows that “set the portfolio and forget it,” then you are not planning your retirement seriously. Revisit your portfolio and check the financial goals and timelines should be on your to-do list.

Financial experts recommend that you must invest in dividend-paying stocks or exchange-traded funds (ETFs3). So, if the market faces any downturn, you can still manage to make your income from that investments.

Consult your financial adviser to determine the right mix of cash, stocks, and bonds for your retirement plans. You can also lower your costs by investing your money in services that offer zero-commission trades.

Moreover, you can go beyond stocks and spread your money in fine arts or maybe even farmland. Why not?

Wrapping up

Here we have discussed five easy steps you can take to make your retirement life safe and secure. Sometimes we also make retirement planning mistakes. So, it’s crucial to take the right steps and make wise decisions to make your life better for you and your better half. So, taking the right approach, making proper strategies, and consulting with your financial advisors will help you for sure.

  1. Quillian, Lincoln, John J. Lee, and Brandon Honoré. “Racial discrimination in the US housing and mortgage lending markets: a quantitative review of trends, 1976–2016.” Race and Social Problems 12 (2020): 13-28. ↩︎
  2. Holden, Sarah, and Daniel Schrass. “The role of IRAs in US households’ saving for retirement, 2020.” Available at SSRN 3789270 (2021). ↩︎
  3. Glosten, Lawrence, Suresh Nallareddy, and Yuan Zou. “ETF activity and informational efficiency of underlying securities.” Management Science 67.1 (2021): 22-47. ↩︎

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