Why You Need Extra Retirement Income

A huge divide is developing between the people who will retire on Social Security alone and those who will have extra retirement income ... from a pension, 401(k), IRA, or job.

When American workers are all averaged together, the typical worker is on track to replace only about 58% of their current income when they retire.  Unfortunately, things are getting worse, not better.  In just one year, from 2014 to 2015, the average income replacement estimate for the typical American worker dropped from 61% down to 58%.  This will not provide a lavish retirement, but it could be survivable ... if the average actually reflected the reality for most workers.  However, even these averages are misleading.

In reality, most people fall into one of two groups ... those who are going to rely on Social Security alone and those who will have Social Security plus at least one additional source of retirement income.  The first group will be barely able to feed and house themselves; the other group will be traveling or moving to luxurious retirement communities, enjoying golf and other amenities.

Here is how things actually break down:

Those who have a 401(k) and/or other retirement plan are on track to replace 72% of their current income.

Those who do not have a supplemental retirement income will, on average, only replace about 42% of their current income.

How Much Income Will You Need in Retirement?

According to most financial planners, you should have a goal of replacing about 75% to 80% of your current income when you retire.  This means that nearly everyone will need to have a supplemental source of income, beyond Social Security.  If you are currently in the category of people who are on track to only replace 42% of your income, because you expect to retire on Social Security alone, you may want to start re-thinking your approach to retirement. 

How Can You Supplement Your Retirement Income?

There are a variety of options for supplementing your retirement income.  Many people use a combination of several sources.  Here are some common ideas:

Contribute to a 401(k) through your current employer;
Make large contributions to an IRA or Roth IRA;
Continue working in your current occupation as long as possible;
Start an encore career in a field that interests you;
Get a part-time job;
Earn a pension through your current occupation (although this is becoming less common).


Since no one can be sure how long they will be able to work, either in their current career or in an encore career, before they have to stop working due to health issues or layoffs, the smartest decision is for everyone to contribute to a 401(k), IRA or a private retirement plan during their working years.  Even if you are on the brink of retirement, it is not too late for you to try to maximize payments into a retirement plan so you have some way to supplement your income in your later years.

How Are the Top Retirement Savers Doing It?

The most successful or "elite" retirees are those who have consistently saved 10% of their take-home pay towards their retirement.  About 20% of all workers fall into this group and they are likely to retire, on average, with an income of about 143% of their current retirement income!

These are the people who will be able to feel confident that they will not run out of money, even if they live for decades after they stop working.  In addition, they will be able to do most of the things they always wanted to do after they stop working ... live where they want, go on cruises, take fun trips, etc.

Which Type of Retiree Do You Want to Be?

Obviously, in order to save 10% of your current income, you need to be able to live on 90% of your earnings during your working years.  Some people believe that is impossible for them.  However, imagine what your life will be like if you have to live on only 42% of what you do now.   That will be far more painful.

Whether you are a young adult in your twenties, or a working Baby Boomer in your fifties, it is never too early, nor too late to start saving for retirement.  If you already have a retirement plan, you may want to talk to a retirement expert to find out whether or not you are on track to replace at least 75% of your current income ... and more, if possible.  You can also use a retirement savings calculator, like the one from Kiplinger's.  You can find a link to it under sources.

Remember:  It is up to you to determine whether or not your Golden Years really will be Golden!


Sources:

http://time.com/money/3752868/retirement-divide-elite/

http://www.kiplinger.com/tool/retirement/T047-S001-retirement-savings-calculator-how-much-money-do-i/

Looking for more retirement ideas?  Use the tabs or pull down menu at the top of this page to find links to hundreds of other articles on financial planning, affordable places to retire, health concerns, family issues, etc.

You are reading from the blog:  http://www.baby-boomer-retirement.com

Photo credit:  Photo of golf course taken by author, Deborah-Diane; all rights reserved.

Fun Ways to Earn Extra Retirement Income

Let's face it.  Most Baby Boomers are going to have to do something to earn extra income during their retirement years.  The vast majority of Boomers simply have not saved enough money to live comfortably during their later years.

We see the reality of this around us.  Several times recently I have been in Starbucks or fast-food restaurants and observed that many of the employees are not the young, college-age kids one would expect to see.  Instead, these part-time jobs are often filled by people who are obviously in their 60's or older.  The same is often true of department store clerks and people in other service industries. I can't help but wonder if they are really enjoying what they are doing.

Instead of working in stressful, demanding jobs after retirement, wouldn't it be nice to find something fun to do that could also provide us with an extra income?  Look around, there might be more opportunities than you realize.

Examples of Fun Jobs for Retirees:

Create something and sell it:  I have a friend named Patti who is a retired Realtor and a wonderful painter.  She spends hours painting a wide variety of ocean and mountain scenes and selling her work at Southern California art festivals where she has gotten to know other artists who are doing the same thing.  It is such fun for her!  When I have visited her booth at the festivals, I have frequently observed that she is surrounded by other men and women our age who are making and selling jewelry or lovely boxes and items they have created out of wood or other materials.  A few years ago I bought some earrings from a 60ish man at a fair in Kona, Hawaii.  He told me that his wife made the jewelry, while he went to the fairs and sold it.  You can even start your own website and sell the things you make online!

Start a New Career and Be Your Own Boss:  Another friend of mine retired after decades of working all day as a hair dresser.  She decided to become a Realtor.  She wanted to try something different and has been successful and happy in her new career.  She only sells retirement condominiums in the community where she lives and she has become an expert in that area.  She never has to drive very far, but she always seems to have several active listings and a few buyers.   She is now in her mid-70's, works her own hours and has complete control over her new career.  It has certainly rejuvenated her.  As you can see, a job that has become drudgery for one person can be a fresh new career for someone else.

Write About Your Hobbies:  Do you like to crochet, knit, quilt, make jewelry or other crafts?  Why not start a blog or website and share your knowledge and experience with others?  While you might not make a lot of money writing about hobbies, you could earn a small amount each year to spend on incidentals, travel or Christmas shopping.  Check out this website: Domestic Diva Online.  The author has turned her love of creating craft projects into a successful website where people can follow her detailed instructions and create adorable crafts of their own.

Write About Your Experiences:  Perhaps you don't feel that you have any hobbies to share.  What about some of your life experiences?  Many people have created blogs about their personal life experiences ... traveling to exotic locations, going on cruises or even more day-to-day experiences, such as interesting places to visit in your local community.  You may have fun experiences that you would enjoy sharing, too.  Whichever type of blog you decide to write, you need to learn how to monetize it by adding appropriate ads from companies like Amazon, Google, Chitika, or Vigilink.  You can also list your blog on Amazon Publishing for Blogs, since some readers will subscribe to your blog on their Kindle.  You'll earn a little here, a little there and, pretty soon, it will add up.

Find a Fun Job:  Perhaps you feel that your financial situation requires you to have a regular paycheck and not rely on the advertising fees from a blog or website.  There are a variety of fun jobs available that you might find very interesting and stimulating.  One of our friends retired as a stockbroker and went to work in a health food store.  He had always been interested in vitamins and nutrition.  Another man I know works in an antique store.  He has a houseful of antiques and, although he worked for a large corporation most of his life, he always loved collecting antiques.  Now he gets to work at a store he really loves and share his knowledge.

Teach: If you have knowledge and expertise in an area, and enjoy sharing that knowledge with others, you can earn money by teaching.  Many of the Emeritus teachers at our local community college are in their 60's and 70's ... and this includes the fitness teachers who lead classes in yoga, Tai Chi, chair aerobics, circuit training and much more.  If you know how to play the piano, guitar or any other musical instrument, teaching is a fun way to earn extra money.  

Tutor Children:  Are you an expert in algebra, geometry or calculus?  There is a huge need for people who are patient and can take the time to really explain this subject matter to teens.  If this describes you, check with your local high school to find out how you can get connected with teens who need your help.

Work with other Senior Citizens:  If you aren't interested in working with kids, go to your local senior center and ask about job opportunities for senior citizens.  You might be able to work as a receptionist at the senior center or for a local business.  There are hundreds of senior citizens, many much older than Baby Boomers, who are working in the area around our community ... in the hospital gift shop, as security people at the community gates, for our homeowner's association, and in many other capacities.  Some of these jobs are part-time and others are full time.

Postpone Retirement and Spend a Few Years in Public Service:  One of the women I walk with every weekend spent two and a half years in the Ukraine after she joined the Peace Corps at age 62.  She had retired from the corporate job that she had held for nearly 40 years, but she wanted to postpone collecting her Social Security or using any of the money in her 401(k).  She did this by working for the Peace Corps.  It was a fabulous experience for her and she still goes on speaking engagements where she is asked to talk about her time in the Ukraine.   If you are interested in doing something like that, check out Encore.org.  This website will help you find government and private public service jobs that are designed for Baby Boomers looking for encore or second careers.  Many of these jobs will be right in your own neighborhood, in case you are not interested in traveling halfway around the world.  What a fun, interesting and satisfying way to postpone your retirement and increase your retirement benefits! 

Even if your Social Security benefits are not very large and you have been unable to save a lot of money for retirement, that does not mean you have to face a poverty stricken retirement.  There are a variety of ways you can make extra money and many of them will be a lot of fun!

If you are currently planning your retirement, you will want to check out the tabs at the top of this article to find links to hundreds of other helpful articles.

You are reading from the blog:  http://www.baby-boomer-retirement.com

Photo credit:  www.morguefile.com