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Many Americans worry that they'll outlive their retirement savings, especially now with a market downturn. Their fears aren't totally unfounded, either. A 2019 World Economic Forum report discovered that people should expect to outlive their savings by roughly a decade.
It's difficult to say just how much money each person needs in retirement since the answer varies from person to person. Your current income, lifestyle and preferences all factor into how big of a nest egg you should have by the time you stop working.
Whatever your financial situation may be, the best course of action is to save as much as possible — and to make that money last as long as you can.
Here are a few tips for making that happen.
Start saving as soon as possible
The No. 1 rule for retirement savings could be summed up in a simple phrase: Start early! According to the U.S. Bureau of Labor Statistics, "Saving early for retirement is the best way to maintain financial independence and security later in life."
But even if you've put off your retirement planning, it's never too late to start building up that nest egg. Shockingly, the U.S. Census Bureau found that 49% of adults ages 55 to 66 had no personal retirement savings in 2017. Don't be part of the 49% who aren't prepared!
Account for taxes
If you're only thinking about how to get the biggest benefits check possible in retirement, you're missing a critical step in your savings strategy. By filing at the wrong time, you could potentially trigger an avalanche of taxes, double your Medicare premiums and forfeit other benefits.
For example, B.O.S.S. Retirement Solutions once worked with a nice couple from Salt Lake City that could have lost hundreds of thousands of dollars from filing at the wrong time. A customized analysis revealed that their strategy would trigger a massive tax bill of $137,251 on their lifetime benefits. B.O.S.S. outlined a different strategy that could eliminate these taxes, so they could keep this $137,251 in their pocket. That kind of money could go a long way in retirement.
Diversify your income sources
Investing your money always comes with risk. One way to reduce that risk is to diversify your portfolio.
"For most individual investors, a solid diversification strategy means holding different types of stock funds, bond funds and cash — and just investing in your 401(k) might not cut it," Briann O'Connor writes for MarketWatch.
With several different fund options to choose from, turning to a professional advisor can help you avoid any overwhelm or confusion.
Keep working
It may be hard to imagine working in retirement, but even a part-time job or freelance work can help give your nest egg a little boost. And it's good for your health, too.
"Working longer is going to be a really powerful lever to increase the money available in retirement, because you're not drawing down your savings and it gives you more of an opportunity to save," Anqi Chen of the Boston College Center for Retirement Research told AARP.
Aside from the financial pros, your mental and physical health will benefit as well. Several studies — including one published in PubMed Central — suggest that working later in life can help stave off cognitive decline.
Create a retirement budget
When your retirement savings is your only source of income, budgeting can help you stretch those dollars further. In an article for Investopedia, financial writer Amy Fontinelle outlines a simple strategy for creating a retirement budget.
"Write down and tally all of your essential monthly expenses, add up your expected retirement income streams, including social security," Fontinelle suggests. "Subtract your expenses from your total amount of monthly retirement dollars. Don't forget to include an estimate on what you will need to spend on healthcare, as well. When your essential costs are covered, anything left over could be used for travel or entertainment."
Talk to a retirement savings advisor
While there are general guidelines about saving up for retirement, you'll want a plan that accounts for your specific circumstances. For example, your spouse may benefit from a different strategy than you. Or it might make sense for you to begin drawing from Social Security sooner rather than later for tax purposes.
Before you settle on a retirement plan, it's important to talk to a financial advisor or a tax professional first. The only way to get the most out of your benefits is to get a customized social security analysis that considers everything, including your benefits, taxes, Medicare premiums, spousal benefits, required minimum distributions and more.
Many companies charge several hundred dollars for a customized analysis. But B.O.S.S. Retirement Solutions underwrites this cost as a courtesy.
If you have questions about your social security benefits, or if you would like to schedule a customized analysis, we're always here to help. The strategies we use are best suited for people who have saved more than $200k for retirement. Give us a call at 801-216-3683 or email retire@bossretirement.com.
Ryan Thacker and Tyson Thacker are the President and CEO of B.O.S.S. Retirement Solutions and Advisors with six offices along the Wasatch Front, one office in Treasure Valley and two offices in Washington state. They are the winner of Utah's Best of State Award for retirement planning for the past two years.
Advisory services offered through B.O.S.S. Retirement Advisors, an SEC Registered Investment Advisory firm. Insurance products and services offered through B.O.S.S. Retirement Solutions. The information contained in this material is given for informational purposes only, and no statement contained herein shall constitute tax, legal or investment advice. The information is not intended to be used as the sole basis for financial decisions, nor should it be construed as advice designed to meet the particular needs of an individual's situation. You should seek advice on legal and tax questions from an independent attorney or tax advisor. Our firm is not affiliated with the U.S. government or any governmental agency. BOSS submitted applications and paid application fees to be considered for the Inc. 5000 Fastest Growing Companies and Best of Utah State for Retirement Planning awards. The award results were independently determined by each organizations' criteria (https://www.inc.com/inc5000/apply/guide and https://www.bestofstate.org/about.html) and the information BOSS provided in the applications. BOSS received the Inc. 5000 award in 2016, 2017, 2018, and 2019. BOSS received the Utah Best of State award in 2019, 2020, 2021 and 2022.
