Coping in Retirement When Investments Aren’t Enough

Many people are sadly unprepared when it comes to finances in retirement. They shouldn’t count on being able to work longer to make that difference up either. Many workers these days don’t have an awful lot in savings and investments that might be used for retirement, aside from their primary residence or specifically defined benefits plans like traditional pensions – 401(k), IRAs, etc. They find themselves coping in retirement, rather than living the good life.

So, what is the answer?

One thing that you can do while you are still working is to automatically fund your IRA or 401(k) so that you don’t even need to think about it every month. You should also make this a greater amount each year you work. If you are already at retirement age though, what, if anything, can you do about it?

Coping in Retirement When Investments Aren’t Enough
Coping in Retirement When Investments Aren’t Enough

Take Out a Reverse Mortgage to Avoid Just Coping in Retirement

This type of mortgage offers people who own their homes and are 62 or older the chance to get regular payments that are based on the amount of equity they have built up in the home. They can receive this money in a lump sum, as a series of monthly payments, or as a line of credit. Once the person who has borrowed the money either moves out or dies, the balance of the loan will be due.

The house will typically be sold for the loan to be paid off and because of this, it is always a good idea to have a conversation about it with family members, so there aren’t any unpleasant surprises down the road. Also, reverse mortgages typically have a mortgage Right of Rescission clause that gives the borrower the opportunity to change their mind.

Balancing Expenses and Income

It is critical that you plan ahead so that your retirement is financially secure. How do you do that when you really don’t know how long your retirement will last though? You plan for longevity in retirement. One of the first things that everyone planning for retirement should do is to take a good, hard look at the expenses you might have in retirement. Don’t forget to deduct things like gas, tolls, parking, business clothes, and the other costs associated with your working life though.

The next thing is to determine where your income will come from once you have retired. Add them up to discern whether or not you will be able to handle your projected expenses. Sources of income might include pension plans, annuities, Social Security, and proceeds from selling a business or if you have any rental properties.

Other sources of income might include things like the cash value of any life insurance policies, investments, employee stock ownership plans, profit sharing plans, IRAs, and 403(b) or 401(k) plans. Monies that come from these sources should be invested so that they can provide you with even more income to offset inflation.

After you have estimated your expenses and the sources and amount of your retirement income, you will know if you will have enough coming in to live comfortably. If you don’t, you might consider cutting back on the proposed retirement lifestyle, moving to an area where costs are less, or getting a part time job.

Investments can be Critical

The failure or success of any investment portfolio you have can be the key when it comes to being able to achieve your goals for retirement. You shouldn’t be overly conservative. The portfolio that you have built should take on the role that your career once had when it comes to earning power and potential.

Just like you insisted that the earnings you made from employment increased on a yearly basis, you should insist on the same thing from your investments. To make this happen, you might need to include a few assets that have the potential to have an increase in value. This means that you will have to take on a bit of risk when it comes to your investments.

A lot of people underestimate their life expectancy, and because of this, they can actually live longer than their retirement money. To avoid this, when you are planning for your retirement, you need to plan for your assets to be enough to last you for a minimum of 25 years.

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