Ever since I started working my first full-time job, there’s something I’ve been looking forward to: retirement.
It’s not that I haven’t enjoyed some of my jobs through the years, because I have. And it’s not that I haven’t enjoyed many of the people I’ve worked with, because I have. It’s just that my ultimate goal in working has always been to earn enough money so that I could retire comfortably and spend my retirement years doing things that I never had time to do before.
But for many American adults, the concept of retirement is scary. Some of us don’t know when or if we’ll ever be able to retire, thanks to a struggling economy, an iffy Social Security situation and a new healthcare system that is being called an accident waiting to happen by many people. Those of us who are nearing retirement age or who have already retired are facing some serious challenges.
We’re certainly not alone. According to a study conducted in 2013 by the Employee Benefit Research Institute, 57 percent of Americans say they have total household savings and investments of less than $25,000 (excluding their homes and benefit plans), 28 percent say they do not believe they will have enough money to retire comfortably when the time comes, 54 percent say they have not yet tried to calculate how much money they will need for retirement, and 39 percent of retirees (and more than 50 percent of workers) say they have a problem with their level of debt.
Fortunately, there are some steps that you can take — right now — to help weather the storm and live as comfortably as possible during your retirement years. It’s a very basic, three-step plan:
- Earn as much money now as you can.
- Secure what you’ve saved.
- Cut your expenses.
If you can successfully accomplish those three tasks, you’ll be in better retirement shape than most Americans.
The more money you have heading into retirement, the more likely that you will have enough to live on through your retirement years. Some suggestions for generating cash now are below.
- Sell stuff: Hold a garage sale or put items up for sale on eBay or Craigslist that you no longer need, including books, clothes, furniture, records, glassware, china, etc.
- Market your skills: Depending on what talents you have, you may be able to earn cash by making clothes or quilts, restoring furniture, fixing broken appliances, pet sitting, etc.
- Turn hobbies into cash: Your favorite hobby may be creating things that other people are willing to purchase.
- Rent your space: If you have room in a basement or garage, you might be able to rent that space to someone looking to store some of their items. Or perhaps you could rent out a room in your home to someone looking for a place to live.
- Maximize Social Security: By waiting as long as possible to receive Social Security checks, you can increase the amount you will receive.
- Tutor: Many parents have children who are struggling in one or more subjects in school. If you have expertise in a subject such as math, you could be a tutor to some of those children.
- Baby-sit: Many parents would rather have a middle-aged or older person they trust babysit their kids than a teenager.
- Pet-sit: People who love their pets are willing to pay to have them cared for in their homes while they are at work or on vacation.
It can be argued that the U.S. economy is improving, although very slowly. But some economists say that this “improvement” is an illusion and that the real evidence points to a coming recession far worse than what we experienced starting in 2008. Regardless of who is right, it’s important to secure your money for retirement.
One Forbes magazine economist strongly recommends short-term Treasury Inflation-Protected Securities (TIPS) if you’re concerned about a financial meltdown in the U.S. It’s a safety net you should be ready to use if necessary.
Otherwise, one formula for diversifying your portfolio now is 50 percent stocks and 50 percent bonds. A safe portfolio is 20 percent stocks and 80 percent bonds, while a risky portfolio is 80 percent stocks and 20 percent bonds. A more detailed recommendation is 30 percent U.S. stocks, 30 percent foreign stocks, 10 percent high-grade bonds, 10 percent high-yield bonds, 10 percent Inflation Adjusted Treasuries, 5 percent Precious Metals and 5 percent Real Estate Investment Trusts.
It’s important to have a plan that factors in how much you’ve saved so far, how much more you’ll need, your spending habits, inflation, expenses that will go away with retirement and others that will arise, the cost of your health insurance, and all of your income sources, including Social Security.
Limiting what you spend is just as important as earning money. Following are a few things you can do now to cut back on spending:
- Downsize your home: If it’s just you and your spouse living in the house, a smaller house or condo might save you money each month.
- Sell a car: If you have two cars and don’t drive as much anymore, selling one of them would give you cash now and save on maintenance, repairs, insurance and registration fees.
- Travel smarter: Check into savings you can gain by traveling on certain days of the week. Look for deals.
- Get senior discounts: Many restaurants, hotels and other businesses offer discounts for seniors, so take advantage of them.
- Avoid impulse buys: These break budgets more effectively than just about anything else.
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