Did you know that having $1 million saved up in your retirement fund is no longer enough? They call this the million dollar poverty. If you retire now, that will not be a problem. 4% of $1 million is still enough to help you survive each year. However, if you are only in your 40s and you plan on saving only $1 million, it will no longer be enough to sustain your needs. By the time you retire, the inflation rate would have already made your savings insufficient. The younger you are, the more that amount will fall short.
What are you going to do?
Obviously, you need to aim higher than $1 million if you want to live a comfortable retirement. This will definitely make it harder to get an early retirement. After all, if you have to save up for a bigger retirement fund, it will take you longer to complete that. It is not like saving for retirement is your only concern at the moment. With all the bills and purchases that you have to take care of in your lifetime, it is a wonder how saving for retirement is possible. But like everything else, we really have no choice in the matter. We need to make sure that you have enough. Nobody really wants to work during their retirement. But if you do not meet the amount that you need, that might be the reality that you will face when you get older.
There is no doubt about it, you need to save more if you want to have enough in your retirement fund. Fortunately for you, there are a couple of things that you can do.
What to do to save more for retirement
As long as you are not yet retired, there is still hope that you can give your retirement money a boost. For those who are poised to retire in a few years, they have a lot of work before them. Apparently, their median income is $62,802 while their mean income is $89,986. There is a lot of room for improvement here. If you want to be comfortable when you retire, you need to work double time to save more.
Here are some tips that will help you save more on your retirement fund.
Take advantage of freebies
According to statistics, 1 out of 4 employees is not taking advantage of matching contributions being offered by their employers. This is free money. You have to take advantage of this. If you plan on contributing $1,500 a year, your employer will match that to make your annual contributions $3,000. That is a huge boost to your fund. This is too good of an offer to pass up.
Cut back on spending
Obviously, you should also make a commitment to lower your spending. You need all the extra money that you can get in order to save enough for retirement. Take a look at everything that you are spending on right now. Maybe you can let go of your cable subscription and just settle for with an Internet connection? Or you can let go of your second car to save on both gas and maintenance costs? Bringing a brown bag for lunch will also help keep your monthly expenses down. Anything that you save from your expenses should be used to give your retirement fund a boost.
Earn more money
While cutting back on your spending helps, it is only limited. You can only cut back on so much. If you really want to increase your retirement contributions, you have to think about earning more. You can try to ask your employer for a raise. That way, you can enjoy a higher income without working longer hours. But if that is not possible, you can always get a side gig. Working online should be a great option for you. If you are a good writer, you can be an online freelance writer. Or you can get hired to manage social media accounts. These will only take a couple of hours a day and you do not have to go outside. All you need is your laptop or desktop and a stable Internet connection.
Be careful when using credit
Since debt is usually a big problem for retirees, you want to get rid of this before you retire. But that does not mean you will not use credit at all. When you are young, you need to keep on using this – especially if you still have plans to buy a house. Getting a good deal on your mortgage means you should have a good credit score. To achieve that, you need to keep on using credit – but it has to be done in a smart way. The best way to do this is to use your credit card and make sure you pay the balance in full by the end of the month. This will save you from having to pay the finance charge that includes the interest rate. When you keep your debt under control, it cannot compromise your retirement fund.
Consider doing all of these to keep your finances under control. Remember that your goal is to free up as much extra money as you can and contribute it towards your retirement savings. Try not to use this money for something else.
What are your options when you are about to retire?
In case you are a few years from retiring and you still do not have enough money in your retirement fund, you need more drastic measures. Here are some of the things that you can do to make sure that you will be retiring with comfortable savings.
Downsize your lifestyle
There are so many ways that you can downsize your lifestyle. You can sell your home and move to a smaller one. If you are about to retire, the chances that your kids have moved out of the house is very high. You probably have a lot of space in your home that you do not really need. It is best to give it up and live in a smaller home. A smaller house will help keep your household expenses lower. Not only that, the mortgage will probably be lower. If you have enough equity in your old and bigger house, you might be able to pay for the new and smaller one in cash. There are also other things you can do – like giving up your second car or something similar.
Settle your debts
If you are about to retire, getting rid of debt is a must. Of course, you are hindered by your financial capabilities. If your debt is too great and you cannot pay for it in time, you need to consider settling your debts. This is a type of debt relief program that will help you pay only a portion of what you owe and have the rest forgiven. Debt settlement can help you get rid of debt in under 2 years. You have the option to hire a professional to help you negotiate with creditors and lender but you can also do it yourself. Offer a lump sum amount that you can pay immediately. Then negotiate that anything it cannot cover should be forgiven.
Think of a passive income
Finally, you have to start setting up a passive source of income. Statistics reveal that only 1 out of 4 say that they have no plans of working during retirement. While this is the ideal situation, we all know that not everyone can afford it. Of the people who said they will work while retired, 6 out of 10 say that they are forced to do so because of financial reasons. If you cannot save up for retirement, you need to think of another source of income to help you survive. The best way to do this is to set up a passive source of income. That way, you receive income without lifting a finger. If you have an extra room in your house or a garage that you can convert, you might want to have it rented out. This extra income will help pay your bills. Consider the various options that you have to help make ends meets when your retirement fund fails to reach more than $1 million.