Retirement Catch-Up Strategies-Part 2
It is not uncommon for people to get a late start on their retirement savings. When they get older, or do an online calculation such as the Ballpark Estimate, they realize that they have a lot of catching up to do.
What to do? There are basically two courses of action: save more before retirement and/or spend less after retirement. Below, in Part 2 of this two-part blog series are six ways to spend less after retirement:
¨ Trade Down to a Smaller Home- Consider moving to a smaller living space for reasons that include lower maintenance, lower utility bills, and lower property taxes. Disadvantage: having to downsize.
¨ Geographic Arbitrage– Consider moving to another location where you don’t have to downsize and will have lower living costs and property taxes. Disadvantage: moving away from familiar people and places.
¨ Work After Retirement– Consider some type of paid employment or self-employment to supplement Social Security and other income sources. Earnings will reduce the amount the amount of savings required.
¨ Tap Home Equity– Consider ways to convert equity in your home into a stream of income. Two common strategies are taking out a reverse mortgage and selling your home to a close relative who rents it back to you.
¨ Spend Less– Prepare a budget that is aligned with your anticipated retirement income. Identify expense categories that can be trimmed, if necessary. It is also not uncommon for expense reduction to occur naturally as older adults realize that they have “enough” of certain items such as clothing and home furnishings.
¨ Make Tax-Efficient Asset Withdrawals– Decide whether to take withdrawals first from taxable or tax-deferred accounts. For many people, it makes sense to withdraw money first from taxable accounts, then tax-deferred accounts, and then Roth IRAs to allow tax-deferred accounts to grow as long as possible.