Even if you’ve been diligent about saving money for retirement, it’s possible to find yourself near retirement without enough, especially as people live longer.
Whether this is due to unexpected healthcare expenses, a lack of running the numbers or other factors, the last thing you want to be dealing with in retirement is how to come up with more income when you should be able to wind down.
“I’ve learned over my career that the better part of 60% to 70% of Americans don’t even plan for their retirement. So they’re already behind the eight ball,” said financial advisor Michael Corgiat, ChFC, senior vice president at Wealth Enhancement Group. “Failure to save enough or failure to plan ahead are two of the biggest mistakes that retirees have.”
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Corgiat explained some ways to transition into retirement if you find you haven’t saved enough.
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Review Your Spending, Determine Importance
The first thing people should do is to look at their essential expenses versus their discretionary expenses, Corgiat said. They should also determine what’s important to them today and what they would believe to be important in the future. It’s from your discretionary dollars — money above and beyond your essential costs — where you’ll likely have to cut back to free up more money, he said.
It’s common for people to want to spend in retirement the same amount that they do in their working years, but that may not be realistic. “Do you want to travel? Do you want to buy an RV and drive all over the country? Do you want to pay for your grandkids college? It’s a matter of really what’s important, and that’s one of the first places that someone who believes they may fall short determine fixed expenses,” Corgiat said.
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Review Housing Needs
One of the biggest expenses in life and in retirement is typically housing, according to Corgiat. “Whether it’s a mortgage payment or rent, a lot of folks go into retirement with the same home that they lived in for the last 30 years,” he said.
If your house is paid off or nearly so, and it’s bigger than your needs, Corgiat said to consider downsizing or relocating.
“One of the neatest things that retirees can do these days is go after the equity in that home through a reverse mortgage,” Corgiat said. “They make sense for a lot of people if they’ve got significant equity in their homes, and that’s an additional source of income that a lot of people never even think about.”
Equity in a home on its own is nice to have for “someday,” but if you’re falling short of your income goals in retirement, it’s another source of potential income.
“I know people who have just outright sold their homes and bought a motor home and travel all over the country. Now it’s a lot less expensive and they get to travel at the same time. They just take their house with them,” Corgiat said.
Max Out Retirement Accounts
If you’re still working, make sure you’re maxing out your retirement accounts. “Look at what opportunities you’ve got while you still have time,” Corgiat said. “Make sure you’re at least taking advantage of your employer’s matching contributions and any profit sharing contributions that they make. And you could put a significant amount of money just simply in your 401(k) and get the tax benefits of it.”
Pursue putting as much money into IRAs and/or Roth IRAs as well.
Save Aggressively
If you get extra money in the form of bonuses, raises or tax refunds, Corgiat urged soon-to-be retirees to train themselves to put away as much of this money as possible into investment accounts or savings.
Doing so will boost your retirement savings and the income you have in retirement.
Invest In the Stock Market
Though any kind of savings is better than none, Corgiat pointed out that investing some of that money could be the way to go. “More money is made in the stock market long term than is ever made in the bond market or the interest-bearing market,” he said.
He noted that while the stock market does have more volatility, it’s also the best way to earn money quickly.
“With equity investments in general, historically they’ve done a lot better than fixed income investments. You need to have a balance between equities and fixed income investments because when one’s up, the other one may be down,” he said.
Invest In Assets With Greater Volatility for Higher Gains
While you shouldn’t take your entire nest egg and invest it into volatile assets right before retirement, you could consider putting some money toward more volatile assets, as they generally offer higher returns (albeit with higher risks).
“The more volatility you’re willing to accept, the better off you will be,” Corgiat said. “So maybe taking a step or two more towards investing more of your money in equity investments will leave you better off because it’s going to grow faster.”
Work as Long as Possible
While early retirement is a great goal, if you retire before you can collect Social Security (typically age 62), then you’re also cutting into your income-earning years at the same time as things like healthcare expenses might be about to go up.
“So working longer or working to age 65 to avoid the additional insurance costs obviously allows your money to grow further working longer,” Corgiat said.
Waiting until just 65 or 67 is going to provide you with a larger Social Security benefit.
Work Part-Time
If full retirement isn’t an option, you could ease into retirement with part-time work, Corgiat recommended. “Just [slow] down if that’s an option for you,” he said.
You could even transition to a less demanding job, if that’s possible. That way, you’ll still have income coming in while also cutting back on your work responsibilities.
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This article originally appeared on GOBankingRates.com: 8 Ways To Transition Into Retirement When You Haven’t Saved Enough
