Six Retirement Tips for Seniors
Time marches on. Before you know it, retirement is not that far away and you’re not as far along on your retirement savings journey as planned. Here are some retirement tips for seniors who have fallen somewhat behind and need to catch up.
Best Retirement Tips for Seniors
If you want to retire by 67, conventional wisdom holds that you should have 10 times your income saved. That means someone earning $100K annually should have a million in retirement savings. Some financial advisors recommend an even larger amount if you want to maintain your standard of living after retiring.
If you’re falling short, you aren’t alone. Almost half of all Baby Boomers don’t have sufficient retirement savings. About 40 percent of Americans aged 60 and up who no longer work full-time rely solely on Social Security. Median benefits are just $17,000 annually. Those born in 1960 and after must wait until age 67 to obtain their full Social Security benefits.
Don’t panic. There are ways to beef up your retirement income. However, you may have to consider working longer before leaving the workforce. Keep in mind that the longer you stay on the job, the longer you have before tapping retirement funds.
Calculate Your Retirement Needs
Before pursuing any other retirement tips for seniors, calculate exactly how much money you think you will need in retirement. Then closely examine what you have.
Make sure to include income from Social Security, pensions, IRAs or employer-sponsored retirement plans. Add in any non-retirement investments or savings.
Do you own your home? Do you still have a mortgage or own the property free and clear? If you own a business, determine its worth and how you might go about selling it.
Once you’ve totaled up your assets, figure on spending about four percent of your retirement savings annually. If you need X amount to meet expenses but will only receive Y, you’ll need to find ways to make up the difference.
Maximize Your Retirement Contributions
According to the Department of Labor, more than a quarter of workers in private industry with access to defined contribution plans such as 401(k)s do not participate. Presumably, a fair amount of these workers are relatively young and retirement is the last thing on their minds.
If you have an employer-sponsored retirement plan such as a 401(k), 403(b), 457 plan or the federal government’s Thrift Savings Plan, there’s good news. For 2022, the IRS has raised the contribution limit to such plans to $20,500. That’s an extra $1,000 over 2021.
In addition to employer-sponsored retirement plans, contribute to an IRA. Those over 50 can add another $1,000 to the $6,000 IRA contribution limit. Even if you aren’t eligible to fully deduct a traditional IRA, it’s still an excellent vehicle for savings. Your earnings and gains aren’t subject to tax until you begin making withdrawals in retirement. At that point, you are probably in a lower tax bracket.
A Roth IRA contribution is made with post-tax dollars. You can’t deduct these contributions, but you also don’t pay tax on withdrawals. In fact, unlike other types of IRAs, you don’t have to make withdrawals at all. Roth IRA eligibility is based on adjusted gross income. For 2022, single filers can make full contributions with an AGI of up to $129,000. They can make partial contributions with an AGI between $129,000 and $144,000. Married couples filing jointly can make full contributions with an AGI of up to $204,000. Partial contributions are available for those with an AGI of $204,000 to $214,000.
Develop a Side Gig
Call them freelancers, independent contractors or moonlighters. A side gig from your regular employment can bring in extra money as well as additional retirement savings opportunities. That’s because you can contribute to a SEP-IRA as a self-employed individual even if you participate in your employer’s retirement plan.
With a SEP-IRA, you can save up to 25 percent of your compensation. The limit is $61,000 for 2022.
Prepare for Unexpected Windfalls
Did you receive a tax refund, bonus or any other sort of extra funds? Rather than spend the money, put it into your retirement savings. Even small amounts of money can add up.
Of course, if you hit it big in the lottery, your retirement money worries are over. What about hitting it relatively small? If it’s your lucky day and you win a few hundred or thousand dollars in a raffle or the office pool, resist the urge to splurge. Put that unexpected money into savings instead.
If you wait until age 70 to claim Social Security benefits, you’ll gain an extra eight percent per year. You’ll also have additional years to contribute to retirement plans. As of 2020, there is no age limit for making contributions to either traditional or Roth IRAs.
If working full-time is not a possibility, consider getting a part-time job. There are many advantages to semi-retirement besides the extra income. You should have sufficient time to enjoy hobbies and interests. A part-time job may offer social opportunities and new challenges. You can also pursue work you really like that isn’t suitable for a full-time career.
Retirement Tips for Seniors and Lifestyle Changes
Perhaps you intend to downsize upon retiring. If your home is already larger than you need, and your children have moved out, consider downsizing beforehand. If you move to a less expensive property, you may prove eligible for a capital gains exclusion on your home sale. And if meeting eligibility criteria, you can exclude up to $250,000 in capital gains if filing singly. The amount rises to $500,000 if married and filing jointly. Those excluded gains could up your retirement savings considerably.
Less drastic lifestyle changes than moving include paring down expenses. Do you need two cars, or is one sufficient for your needs? How about cutting the cable cord, or getting rid of steaming services you rarely use? Cooking from scratch rather than purchasing prepared foods saves money and is healthier. There are dozens of ways to prune your budget and put these savings towards retirement.
These and other retirement tips for seniors can help you enjoy the comfortable post-work life you deserve.
About Jane Meggitt
Jane Meggitt specializes in writing about personal finance. Besides investing and planning for retirement, she writes about insurance, real estate, credit cards, estate planning and more. Her work has appeared in dozens of publications, including Financial Advisor, Zack’s, SF Gate and Investor Junkie. A graduate of New York University, Jane lives on a small farm in New Jersey horse country.