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When it comes time to clear off your desk, bid your co-workers farewell and enter the next phase of your life, will you be financially prepared for retirement? According to countless national polls and research studies, many older adults are far from ready. In fact, a recent survey reveals one in three Americans hasn’t put a penny toward retirement savings.
This trend could spell trouble for baby boomers—the generation born between 1946 and 1964—nearly half of which are already in retirement. Although some retirees may be able to get by on their Social Security checks and income from private company pension plans, the majority of this demographic will likely find it difficult to make ends meet.
It’s common knowledge that saving as much as you can, as early as you can is the best way to protect your financial future. But what if you reach your retirement years with little (or nothing) in the bank?
Here are a few tips baby boomers can use to make the most of their retirement funds:
Stick to a Budget
After you cash your last paycheck, you might soon find out that you’ll need to adjust your spending habits. Whether you’re accustomed to living on a strict budget or this is your first time crafting one, you should consider how you’ll handle the transition and how it will affect your personal finances. Be sure to spend within your means and according to your “new normal” and always keep your long-term expenses in view.
Begin by gathering all of your financial records from the past year. Next, make a list of your fixed monthly expenses, followed by one that contains costs that are more variable in nature. This will give you a bird’s eye view of your spending and savings, including which expenses, if any, you’ll need to reconsider.
For example, some seniors find that their life insurance premiums become too costly to maintain month over month. Others may experience a change in their health status, causing them to reconsider their need for a life policy. Selling your life insurance policy on the secondary market can have several positive effects on your finances—not only will you receive a sizable sum for your policy, you’ll be relieved of the burden of monthly payments. To find out if you qualify, speak with your financial advisor or seek a quote on your policy.
Evaluate Your Healthcare Needs
Healthcare costs tend to increase as you age, making it vitally important to maintain your health and wellbeing well into your retirement years. It’s also helpful to assess your health insurance needs and how they factor into your budget. Programs such as Medicare and Medicare Advantage can help baby boomers in their mid-to-late 60s manage healthcare costs; however, it’s up to you to decide which coverage plan will suit your needs best.
Downsize Where You Can
Many older adults choose to relocate to a smaller home once their children have left the household and they no longer need so much space. If you decide to sell your house and move into a townhouse or condo, for example, you’ll not only benefit from the sale itself, but things such as your property taxes and insurance costs will likely drop, as well, allowing you to pad out your retirement savings.
Regardless of when you plan to retire, the key to a happy, healthy future is to start planning early. Even after you’ve retired you should keep adding to your savings and monitoring your spending on a regular basis.