Millions of Americans will reach their retirement age in three to four decades. While it may seem like a long time, this period will pass in the blink of an eye. You’ll reach your full retirement age—66 or 67—before you know it.
You need more than a million dollars to live comfortably after retirement. Now, the question is, do you have enough savings for your golden years? CNBC’s poll finds that 53% of Americans are behind when it comes to retirement planning and saving. However, you can enjoy a comfortable, secure, and fulfilling retirement only if you build financial resilience.
That said, we’ll share some strategies that will help you prepare for a financially resilient future.
#1 Start Saving Early and Consistently
Americans need $1.46 million to retire comfortably. You cannot accumulate this sum overnight. Building a substantial retirement fund is only possible if you start early.
Take, for example, you save $200 every month starting from 25 years. With an average annual return of 7%, you will have more than $500,000 by the age of 65. But if you start saving at 35, you will have to save nearly double that amount every month to reach the same goal.
Starting early, however, won’t grow your retirement funds if you aren’t consistent. You must contribute to your savings each month, irrespective of market conditions. Setting up automatic transfers to your retirement account can help you maintain consistency. That will help you stay on track and ensure you regularly contribute to your future financial security.
#2 Manage Debt Wisely
In a survey conducted by Statista, 28% of U.S. consumers reported credit card bills as the primary source of personal non-mortgage debt. Car loans were the leading source of debt for about 12% of respondents. A recent feature of CNBC has disclosed that U.S. citizens are going into debt to purchase groceries.
Borrowing money at a time when you need it can help you manage immediate financial pressures. But it may lead to financial instability in the long run. A staggering 77% of households deal with some form of debt in the U.S. If your house is one of them, now is the time to manage debt.
High-interest debts such as credit card balances can add unnecessary financial stress and erode your savings. Pay off these debts first to reduce the amount of interest you pay over time.
You can also follow the snowball or the avalanche method. The former involves paying off the smallest debt first. The latter, on the other hand, prioritizes tackling the debts of the highest interest first to save more on interest.
Refinancing options can lower your interest rates on mortgages or personal loans. That will help you reduce monthly payments and free up more money for savings. Also, avoid accumulating new debt as you approach retirement. Sticking to a budget will further allow you to live within your means.
#3 Delay Social Security Benefits
You can claim social security benefits when you turn 62, but you must wait to withdraw them until your full retirement age.
Delaying can significantly increase your monthly payments, providing a larger financial cushion during retirement. This is valuable saving advice for seniors since their benefits increase by a certain percentage for each year they delay beyond their full retirement age. You can enjoy full benefits if you claim Social Security upon reaching your retirement age.
For those born from 1943 to 1959, 66 is, ideally, the full retirement age. But 67 is the full retirement age for those born in 1960 or later.
Moreover, continuing to work while delaying benefits can further boost your Social Security calculations. That is because benefits are based on your highest 35 years of earnings.
#4 Take Full Advantage of Retirement Accounts
Retirement accounts like individual retirement accounts (IRAs) or 401(k)s can help you build a robust financial foundation for your golden years. Hence, contribute to those accounts.
Traditional 401(k)s and IRAs allow for tax-deferred growth. That means you won’t have to pay taxes on contributions or earnings until you withdraw them, potentially lowering your taxable income now.
Winding up, if you want to achieve financial resilience in your golden years, you must take proactive measures now. These strategies will help you build a robust financial foundation, allowing you to enjoy your golden years with peace of mind. Hence, implement them.
Keep in mind that it’s never too late or too early to take control of your financial future. Start today, and rest assured that you will enjoy a worry-free retirement.