Falling Short on Retirement Savings

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It’s a fear that many of us have. For some, it’s a reality.

You’re close to retirement age, but when you sit down and run the numbers, it’s pretty clear that if you retire at 65, you’re going to have to make some very tough choices. No matter how you slice it, the money simply isn’t there.

What do you do?

This can easily be a nightmare situation. I’ve read emails from panicked readers approaching sixty years of age and they’re just realizing that they’re simply not going to make it to where they need to be to retire at age 65.

Whenever I hear from a reader in that situation, I usually tell them one thing above all else. Don’t panic. Making financial moves in a panicked mindset has a high likelihood of leading straight to a mistake. Spend some time calming down and realizing that the world is not coming to an end.

After that, you should walk carefully through three questions, just to see how they impact your life.

What happens if you work another five years beyond your plan? If you’re planning on retiring at 65, what happens if you retire at 70 instead? It can make all of the difference, for several reasons. Here are three of the big ones.

One, it gives you five more years to save for retirement. If you’re saving a significant portion of your income, this can really add to your retirement total.

Two, it gives your investments five more years to grow. This allows you to be more aggressive with your investments in the short term than you otherwise would be, opening the door to the possibility of substantial additional growth.

Three, it will improve your Social Security benefits. Full Social Security benefits don’t kick in until age 67. Prior to that, you can begin your benefits, but at a reduced rate, so waiting until at least age 67 to retire is quite beneficial.

Can you wait another five years to retire beyond your previous plan? That move can often turn a retirement disaster into a workable plan.

What happens if you retire and take a part-time job? I think this is a good plan for virtually any retiree. You’ll need something to fill up the hours and a part-time job can do just that.

Several of my grandparents and great grandparents, upon retiring, basically stopped doing anything at all. They didn’t engage in the community. They didn’t find activities or other things to invest themselves in. They just spent several years drifting, then they fell into poor health and eventually passed away.

A part-time job or a small business can overcome that. It can keep you busy and fill ordinary days with activity and social interaction. Not only that, it can provide much-needed income at a key point in your life.

What happens if you downgrade your living space to bolster your retirement savings? Many older married couples or single folks live in homes that are substantially larger than what they need. Often, those homes are the ones they lived in as their children grew up, when they needed more space. After the children move out, that space largely becomes storage space.

Consider selling your home and moving to a smaller one, or even moving to a small apartment. This can also involve an estate sale as you sell off a lot of your possessions that you don’t really need anymore, and it can also be a time where you pass along some belongings to relatives.

This can strongly bolster your retirement savings, reduce your monthly costs (since utilities will be significantly lower in a smaller home), and give you a place to live that’s more manageable as you grow older (and also require less time spent on upkeep).

These moves, taken by themselves or taken together, can radically transform one’s retirement situation. If a person chooses to move to a smaller place, continue working for a few more years to bolster savings and get stronger Social Security benefits, and plan for part-time work after leaving the workplace, their retirement picture can easily turn from disastrous to reasonable.

The amount you have saved for retirement is important, but it’s not the only factor that matters. The life choices and professional choices you make have an enormous impact as well.

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