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America is about to experience a retirement tidal wave.
According to an article from Empower’s publication The Currency, an estimated record 4.1 million Americans turned 65 this year.
However, some older Americans are hoping to retire even earlier than 65. But with the cost of living on the rise, they may be asking themselves whether that’s possible.
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According to RetireGuide, the average annual retirement income for Americans 65 and up in 2023 was $83,085 when adjusted for inflation. Should you live for another 30 years, that means you’ll need $2,492,550.
While the average net worth for people over 65 is only around $1.6 million, Americans in their 60s spend about 18% more monthly on average than the general population, according to the Empower figures.
Before you panic, let’s look at three tips you can use to help guide your retirement decision.
The 4% rule
Many financial advisors recommend that retirees live by the rule of thumb of taking out 4% of your savings each year. This is the amount you can withdraw no matter what and hypothetically still have your retirement savings last another 30 years.
The main question here is whether this will offer you enough income, when combined with Social Security, pension, and all the rest. If you have $500,000, that would only be $20,000 per year. However, if you have $2 million, that would be $80,000.
That’s why, no matter what your 4% adds up to, you want to make sure you’re taking every measure to stretch it out. A Roth IRA account can help you in this regard — helping you build tax–free retirement savings.
Consulting a financial advisor specializing in retirement planning can help you open a new account or make the most of your current Roth IRA account.
With RothIRA.org, you can find a vetted financial advisor best suited to guide you. The process is simple: just provide some basic information about yourself, and RothIRA.org will match you with two to three FINRA/SEC registered financial advisors near you.
You can then set up a free initial consultation with your preferred advisor to further assess if it’s the right fit for you — with no obligation to hire.
While most would-be retirees have IRAs for savings, you may not know that you can invest your retirement savings in commodities through your IRA, including gold.
Many investors are attracted by gold’s stability relative to the stock market. For example, while the market crashed in 2008, gold prices rose, cushioning the portfolios of investors who were savvy enough to diversify.
You can invest in a gold IRA with the help of American Hartford Gold. This type of IRA allows you to benefit from the tax advantages of an IRA, along with the inflation-hedging properties of gold.
When you sign up for American Hartford Gold, you’re eligible to get up to $10,000 in complimentary silver and a free investor guide that can show you how to protect your nest egg while growing your wealth.
Get some guidance
It’s easy to get overwhelmed when it comes to retirement planning, but remember that you don’t have to make these big decisions on your own — consulting with a financial professional can provide important insight into the best steps to take next in all aspects of your life and finances.
If you’re not sure how to go about finding the right person to talk to, you can match with a certified financial advisor through WiserAdvisor.
Based on your finances and retirement goals, WiserAdvisor matches you with 2-3 vetted professionals near you for free. From there, you can set up a free, no-obligation consultation with your preferred advisor.
Read more: Cost-of-living in America is still out of control — use these 3 ‘real assets’ to protect your wealth today
You need $1 million (or more) in the bank
A recent survey by Northwestern Mutual found that Americans believe they need $1.25 million to retire comfortably today and continue receiving income for the next 20 years.
While $1.25 million isn’t realistic for everyone, it’s still a great idea to create a retirement goal based on the advice of your financial advisor and a budget.
Don’t overlook simple savings vehicles, especially as a way to keep growing your money after your retirement. One of the easiest ways to save is to take advantage of the higher rates on certificates of deposit. For instance, Discover offers certificates of deposits with maturities ranging from three months to 10 years.
Right now, Discover is offering 4.10% APY on a 12-month term — much higher than the average 0.05% APY offered on some accounts offered by other big banks.
Discover CD has no fees associated with its CD accounts and you don’t need a minimum deposit to open an account.
Savvy savers should also check out the Moneywise list of the Best High-Yield Savings Accounts of 2024 list so you can have a streamlined look at which high-yield savings account is best for your needs.
Of course, your retirement years will entail a number of expenses, and essential purchases are inevitable. But you can make the most out of them by downloading the Acorns app.
With Acorns, when you spend money, the app automatically rounds up the total cost to the nearest dollar and invests the remainder in a diversified portfolio — so even when you have to spend, you’re investing money at the same time.
For those looking to enhance their investing strategy, Acorns offers tiered memberships, including a gold tier that allows you to customize your portfolio by adding individual stocks, and a retirement account with a 3% IRA match.
If you sign up for Acorns today, you can receive a $20 bonus investment.
The rule of 55
This last rule of thumb deals with the tax implications of retiring early. While some potential retirees will have plenty of savings, it won’t be beneficial to retire early if you end up paying normal income tax. This is the case for those retiring after 55.
Usually, you’d face a 10% tax withdrawal penalty for making a withdrawal from a tax-qualified retirement plan like a 401(k). But for workers who have an employer-sponsored 401(k) plan, the IRS allows anyone over the age of 55 who decides to leave the workforce to start drawing penalty-free distributions from that plan.
It’s also not beneficial to retire early if you’re still paying off debts. To make sure you’re in the best possible position when that time comes, you’ll want to have settled as many of your outstanding debts as possible.
To expedite this process, you can use a free service called Credible to consolidate your debts into one monthly payment.
Rather than worry about multiple bills that each have their own minimum payments, deadlines and interest rates, you can take out a new loan with a lower interest rate and use it to pay off your other debts immediately.
You’ll then only have to make a single payment each month, and the lower rate will potentially save you a huge amount in interest — more money that you’ll be able to set aside for retirement.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
