While many Baby Boomer gear up to leave the workforce, their financial standing isn’t exactly prepared for the transition.
The median savings balance for those between the ages of 56 and 76 is under $150,000 and inadequate by most standards.
Baby Boomers have saved more than twice the amount of Millennials and Gen Xers combined, yet it is still not enough and leaves this generation with a lot of work to do.
To put the shortfall into perspective, consider that the average senior receives about $20,000 a year in Social Security benefits. Yet, adults under the age of 65 will spend about $46,000 a year, according to the Bureau of Labor Statistics. The result? A $28,000 deficit.
Furthermore, the $144,000 average savings doesn’t come close enough in bridging the difference.
Using the four percent rule of withdrawal rate, that amounts to an annual income of $5,760. Even lumped together with Social Security allocations, retirees will be left with less than $2,000 a month.
That’s simply not good enough – especially when you bring taxes into the mix. Retirement plan withdrawals might be subject to taxes, including plans not under Roth IRA or 401(k).
What is someone near retirement age to do if they find themselves in this predicament? How can they turn insufficient savings into something sustainable for the long haul?
Delaying retirement may be one step to help bridge the gap. This multiprong approach allows near-retirees to leave their savings account untouched while also adding to it.
In addition, individuals close to retirement may delay Social Security benefits so they can reach optimal retirement age status. For each year held off, beneficiaries can increase their payout by 8 percent until the age of 70.
The math is simple: instead of $18,000 a year, a retiree can instead pull in more than $22,300.
Retirees who feel too far behind may have to live with the reality that they’ll be employed in some capacity during retirement.
The gig economy offers retirees a plethora of opportunities if they are a little creative and are willing to take on something new.
Other possibilities retirees with less-than-ideal savings can consider is downsizing their home and lifestyles. This means moving into a less expensive property and cutting back on vacation. Both options are not ideal but can provide some financial cushion for a comfortable retirement life.
A Home Equity Conversion Mortgage* may also work well with retirement planning.
Retirees 62 or older can begin to explore the benefits of this mortgage program, which can double their buying power, let them retain their liquidity, and open the door to new financial opportunities.
As part of the plan, borrowers will no longer make monthly payments as long as they live within the home and are entitled to sell the house, or pass remaining equity on to their heirs.
Please contact us today to learn more about this opportunity to boost your income and to enjoy the new freedoms of retirement life without any compromise.
Home Equity Conversion Mortgage Disclaimer
*(1) at the conclusion of a reverse mortgage, the borrower must repay the loan and may have to sell the home or repay the loan from other proceeds; (2) charges will be assessed with the loan, including an origination fee, closing costs, mortgage insurance premiums and servicing fees; (3) the loan balance grows over time and interest is charged on the outstanding balance; (4) the borrower remains responsible for property taxes, hazard insurance, and home maintenance, and failure to pay these amounts may result in the loss of the home; and (5) interest on a reverse mortgage is not tax-deductible until the borrower makes partial or full re-payment. This material is not from HUD or FHA and has not been approved by HUD or any government agency.