Retiring without savings is not ideal. Yet, 42% of baby boomers nearing or in retirement, have no money set aside. Increases in life expectancy, means today’s retirees can expect to live between 20 and 30 years beyond 65. Funding retirement is a challenge for even the most organized person.
If you have difficulty setting money aside or have reached retirement age with little or no savings, these strategies will help you live in retirement without any savings.
Draw Social Security Later
When Social Security is your sole source of income, you want to receive the highest payout possible. Delaying your benefits until age 70 can increase your payout by 24% to 30%, depending on your full retirement age. If you received an average payout of $1,404, you could increase your annual income by over $4,000 by waiting three years.
Currently, the average Social Security payout provides an annual income of less than $17,000. An extra $4,000 would bring the total to $21,000 per year. When the government established Social Security, it was designed to supplement work pensions, not fully fund retirement. However, for those 65 and older, 1 out of five married couples and 2 out of 5 single adults receive 90% of their income from the program.
If you suffer from a chronic illness that prevents you from working longer, or face a disease that will shorten your life expectancy, you may be better off claiming benefits at an earlier age.
Married couples should claim benefits considering your lifetime needs, because when the first person dies Social Security payments decline to a single payment. In many cases, the lowest paid worker will receive benefits early (or at full retirement age), while a higher earner usually waits until 70 to begin receiving benefits.
Using skills you already possess, you can remain in the workforce beyond the traditional retirement age. Working longer might allow you to delay Social Security payments and pay down debt balances. When you eliminate debt before retirement, you lower your cost of living.
Layoffs and downsizing could prevent you from continuing to work with your current employer. In these cases, you could accept a retail job, clean houses, drive for Uber, or use computer skills to obtain freelance work. The expansion of the internet has granted access to dozens of side jobs that can help provide a steady stream of income.
Selling your home and paying cash for a smaller residence can eliminate up to 30% of your monthly costs. A smaller home will also lower utility and maintenance costs for added savings. Even if you cannot eliminate the mortgage, a less expensive home can lower housing costs, allowing you to live comfortably on less income.
Choose Your Geography Carefully
You can move to a smaller home or choose to live in a less expensive location. Both can achieve the objective of lowering your cost of living. A cost of living calculator can help you compare prices in various cities.
If you lack savings for retirement, moving to a cheaper city can make a significant difference in your overall costs. State income and property taxes are more expensive in the north and west, and many locations with lower costs for housing and taxes do not compromise your quality of life.
While considering the geography, also consider whether you want to live in the city or the country. Urban areas tend to have higher housing costs. However, you may not need to maintain a vehicle to have easy access to services and entertainment. Country living, on the other hand, can save on housing, but often has a higher cost of goods, less access to healthcare facilities, and requires a vehicle to get around.
In addition to housing costs, consider state taxes, healthcare, and transportation costs. The Department of Housing and Urban Development can help you evaluate the cost of living in any state. They also offer services that can lower your cost of relocating.
A move overseas is another strategy to lower costs through the cheaper housing, food, and medical care, which account for the highest expenses for retirees.
Find a Roommate
Enlisting a roommate can cut your housing and utility costs in half. If you still owe a mortgage, housing is likely the biggest retirement expense outside of healthcare. Use the rent payment to pay down the mortgage, pay property taxes, and maintain the home.
Renters can also share living space if the landlord approves.
When you have built a large amount of equity in your home, a reverse mortgage can allow you to age in place. The initial costs are higher than a typical refinance, but you no longer need to make a mortgage payment, thus reducing your overall cost of living.
A reverse mortgage essentially converts your home equity into cash flow. You can take a single cash advance or use it as a line of credit. To qualify, you must be at least 62 years old, and loan approval standards are less stringent than a traditional loan or line of credit, which benefit seniors at lower income levels.
You must live in the house and continue paying for home insurance and property taxes, along with maintaining the home. Entering a nursing home could result in the loan coming due. You can sell the house and pay off the loan at any time. If equity remains at your passing, heirs can inherit the balance.
It is possible to receive a cash amount up to 75 percent of the home’s value in a reverse mortgage with a maximum of $625,500. Even though you do not make a monthly payment, it is a loan and accrued interest will increase the balance each month.
If you are burdened with high amounts of credit card debt and are struggling to make your payments, or you’re just not seeing your balances go down, call Timberline Financial today for a free financial analysis.
Our team of highly skilled professionals will evaluate your current situation to see if you may qualify for one of our debt relief programs. You don’t have to struggle with high-interest credit card debt any longer.