Showing posts with label how to increase retirement income. Show all posts
Showing posts with label how to increase retirement income. Show all posts

Wednesday, November 2, 2016

How Much Retirement Income Will You Have?

If you are getting close to retirement, have you taken the time to estimate how much retirement income you will have?  Will it be enough to maintain your lifestyle?  Will you be able to live where you want?  Travel?  Take care of medical expenses?

The truth is that the vast majority of retirees will barely have enough money to take care of their basic needs.  Of course, there are steps you can take to improve the quality of your retirement, but first you need to know how much retirement income you will have.  Once you have figured that out, then you can decide how to fix any shortfalls.

Estimating Your Social Security Income

According to the Social Security Administration, at the beginning of 2016, the average monthly Social Security benefit for a retired worker was $1,346.  The average Social Security for the spouse of a retired worker was $697. This would mean that the average couple living off their Social Security benefits alone would receive $2,043 a month or $24,516 a year. Many people receive less than this average amount. In 2017, the cost-of-living raise is expected to be about 0.3 percent ... or about $4 for a retired worked and $2 for their dependent spouse. 

The amount of benefits increases slightly each year and varies depending on the individual.  However, most people find it is significantly less than they have earned during their working years.

If you have had a high income, earning over $118,000 a year or nearly that amount for the decade before you retire, then the maximum amount you could receive in Social Security benefits if you retire at your full retirement age of 66 or 67 in 2016 would be $2,639.   If your dependent spouse also waited until their full retirement age to collect based on your benefits, they could receive half that, or $1,320.  This means that a high earning couple with one spouse paying the maximum into Social Security could have $3,959 a month or $47,508 a year in retirement income.  While this is far better than the couple receiving only the average amount of Social Security benefits, it would still be substantially less than the $118,000 a year this couple was accustomed to have for their living expenses.

For each year between ages 67 and 70 that the breadwinner postponed their retirement, the amount of their benefits would increase by 8 percent ... for a maximum of a 24 percent increase.  This would bring the total benefits for a couple up to $59,385.  This is a nice increase, but the breadwinner would have to work several more years to receive this amount, and it would still only be about one-half of their pre-retirement income.  The reality is that only about 1 percent of retirees wait until the breadwinner is 70 years old before they begin to collect their Social Security benefits.

Unfortunately, most people do not come anywhere near receiving the maximum amount of retirement income from Social Security.  Approximately 48 percent of women and 42 percent of men begin to collect their benefits at age 62, which means they receive about 25 to 30 percent less than they would if they had waited until age 66 or 67 ... or approximately $1,500 a month for the average couple ($18,000 a year) and only $3,000 a month ($36,000 a year) or less for a high earning couple.

If this is not enough money for you and your spouse to live on, then you will have to supplement your Social Security benefits with your savings or by continuing to work well into your senior years.

Calculating Your Possible Income from Money You Have Saved

According to the Vanguard Funds report "How America Saves 2016,"  the average retirement account balance for people between the ages of 55 and 64 is $177,805.  For younger adults, the average retirement account is much smaller.

Investment advisors recommend that people who want to make sure that their retirement funds last the remainder of their lives start out by withdrawing no more than 3 to 4 percent a year from their account, with modest adjustments as the years go by, depending on how much their balance increases in value in the future.  This means that a couple with the average balance in their retirement account of $177,805 who decides on a modest 3.5 percent withdrawal rate would have an income of $6,223 a year or an extra $518 a month that they could use to supplement their Social Security benefits.

The actual income from retirement savings will vary depending on how successful you have been at saving money in the years prior to retirement.

How Much Total Retirement Income Will You Have?

Based on the numbers above, an average American couple who has managed to save the average amount of money will have a retirement income of approximately $30,739 a year from the combination of Social Security and withdrawals from their savings.

A high earning couple who has saved the same amount of money will have a total retirement income of approximately $53,731 a year if they wait until the breadwinner's full retirement age of 66 or 67 to begin collecting Social Security.  If they wait until the breadwinner is 70 years old, they can add another $11,000 to that amount.

Of course, single individuals will only have their own Social Security benefits or those of their former spouse, if they are a widow or widower.  Consequently, the retirement income of single people will be significantly less than that of a couple, although their expenses will also be less.

What if This is Not Enough Retirement Income?

If you have done the calculations and are starting to realize that your retirement income will not be adequate to live on when you retire, you should start making adjustments early.  Some of the things you can do are:

Cut your expenses by reducing your lifestyle now, including downsizing to a smaller home.

Pay off your home, car and other debts prior to retirement.

Save as much money as possible to increase your retirement income.

Postpone retirement until the breadwinner is 70 and the spouse is at their full retirement age of 66 or 67.

If you are interested in learning more about financial planning, where to retire, common medical issues, Social Security, Medicare and more, use the tabs or pull down menu at the top of the page to find links to hundreds of additional articles.

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Wednesday, July 1, 2015

How to Fix Your Retirement Savings Shortfall

Millions of Americans are not prepared to retire.  In fact, about one out of four Baby Boomers who are approaching retirement have saved absolutely nothing towards their retirement.  Millions more have saved less than $50,000 ... which will not last very long, unless they quickly make some drastic changes in their lifestyle.

However, for those Boomers who are still five or ten years away from retirement, it is not too late to take the necessary steps to have a comfortable retirement.  Below are some of the suggestions the experts make:

Start Saving the Maximum in Your 401(k) or IRA

If you are not maxing out your retirement accounts, you are not taking advantage of the tax savings these accounts can give you, nor are you using your last few working years to fully prepare for retirement.  Workers over the age of 50 are allowed to put $24,000 a year into a 401(k) and $6,500 a year into an IRA.  You may feel that putting $500 to $2500 a month into your retirement accounts is impossible, because your current lifestyle costs too much to support.  If this is the case, now is the time to dramatically and ruthlessly reduce your lifestyle.  If you can barely support your lifestyle while you are still working, it will become even more difficult for you to maintain your lifestyle after you stop working ... especially if you do not have much money saved.

There is no question that it will take hard work and discipline to start saving that much money.  However, you will appreciate the long-term benefits of having this much money saved when you are in your 80's and 90's.  Now is the time to make the necessary adjustments to your cost-of-living so that you start putting as much money as possible into your retirement accounts. 

Use the Equity in Your Home to Finance Your Retirement

If you own your home and have lived in it for a long time, you may have tens of thousands or even hundreds of thousands of dollars in home equity.  This money can be used to finance your retirement, if you are smart about how you use it.  Some people have found they do well if they sell their current home and use part of the equity to purchase a less expensive home, either in the same community or in a less expensive area.  Afterwards, they can invest the remaining equity in dividend paying stocks, an annuity, tax free bonds, or other investments that will provide them with a reliable source of retirement income.  The combination of lower expenses and increased income can help many people salvage their retirement.

Another way to use the equity in your home is by taking out a reverse mortgage.  However, there are a number of risks involved with this plan.  If people initiate a reverse mortgage when they are still in their 60's or early 70's, they may end up spending all the proceeds from the loan far too quickly ... leaving themselves destitute when they are in their 80's or 90's.  It is far wiser to wait to get a reverse mortgage until you are older and fairly confident that the proceeds will last you the rest of your life ... and the life of your spouse.  

Postpone Collecting Social Security Until Age 70

People who wait until age 70 to collect their Social Security benefits can significantly increase their monthly income compared to those to begin collecting between the ages of 62 and 67.  Your benefits increase by 8% for every year you wait after your full retirement age.   This means you will get 32% more than you would have at age 66, and 76% more than you would have at age 62.   By waiting, a retirement pension that might have been only $1500 a month at age 66 can be increased to almost $2000 a month at age 70.  That difference provides as much additional income as $100,000 in savings invested at 6% interest.

Continue Working After Retirement

There are significant advantages to working as long as you can in your 60's and, possibly, your 70's.  Even if you switch from working full-time to part-time, any money you earn equates to less money you will have to take out of your retirement savings.  This, in turn, will give you the time you need to continue to grow your nest egg.  By the time you are no longer able to work, your savings may have grown enough to provide you with a satisfactory lifestyle for the remainder of your life.

Many people also use these years to work part-time and enjoy encore careers that are fun ... as consultants, substitute teachers, writers, artists, photographers or employees of non-profits.  They keep busy, stimulate their brains, bring joy to their lives, increase their socialization and earn extra retirement income.  What better way to make your retirement savings last?

Bottom line:  It is never too late to do something about your retirement savings situation.  You just have to be willing to face reality and make the necessary changes.  You can do it!


Looking for more retirement information?   Use the tabs at the top of the page to find links to hundreds of other articles on this blog covering topics that include financial planning tips, where to retire, health concerns, and relationship issues.

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Thursday, February 23, 2012

How to Increase Your Retirement Income

Interest and Dividend Income have
been discouraging in recent years.
If you are disappointed in your interest on savings, you are not alone.  Although many people love the low interest rates that are currently available for mortgages and auto loans, they hate the low rate of interest income they are getting on their savings.

For people who are retired, or near retirement age, this is an especially serious problem.  Until a few years ago, many people could get 6%, more or less, on a long term money market account or Certificate of Deposit.  However, today those rates of interest on savings are a thing of the past.  For retirees who were dependent on that income to meet their monthly expenses, this decrease in their retirement income has been devastating.  What are some steps you can take now to at least get the maximum interest rate possible?

Find Higher Interest on Savings from a Credit Union

Many people who have had a long relationship with a bank continue to keep their savings in that bank, without shopping around for a better deal.  However, if you have a bank savings account that is earning around 1% or less, you should be able to do much better by moving your money to a credit union.  Anyone living on a fixed income owes it to themselves to make sure they are getting the highest interest rate possible in order to avoid pulling money out of your principal in order to survive.

According to information about interest rates available to the public on, you can earn as much as 1.40% on some CDs.  Although these rates are still low, they are higher than most banks are currently paying their account holders. 

You can find more out about credit unions that you can join in your area at  You may also want to ask a friend or relative if they belong to a credit union.  All you need is an invitation from a current member in order to join many credit unions!

Be Careful When Purchasing Bonds and Bond Funds

According to an article entitled "The War on Savers" in the February/March 2012 AARP Magazine, current interest rates on shorter-term Treasury bonds are ridiculously low.  In addition, when you buy bonds, the value of the bonds will decrease when interest rates eventually increase.  Consequently, any income you currently earn from the bonds could be lost when interest rates rise and the bond price drops.  Junk bonds pay a higher rate than Treasuries or high quality corporate bonds, but are much riskier. These types of high risk investments are not a good idea for most retirees or people nearing retirement.

Put Some Assets in Dividend Paying Stocks

In addition to putting your savings in a credit union, another suggestion by the author of "The War on Savers" is to invest a portion of your savings in high quality dividend paying stocks.  You can either use the dividends for current income or, if you don't need the income yet, you can use a DRIP (Dividend Reinvestment Plan) to build up the size of your portfolio.

As you diversify and work to increase the income from your current assets, you may see your retirement savings begin to grow again.

The important issue here is to not just sit back and assume there is nothing you can do to increase the income from your savings.  There are actions you can take to assure yourself of a more comfortable income from the savings you have put aside.

If you are interested in other ways to improve the quality of your retirement, use the tabs or pull down menu at the top of this page for links to hundreds of additional articles on affordable places to retire, medical issues to consider, changing family relationships, financial planning and more.

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