This post is sponsored by the Alliance for Lifetime Income.
Millions of Americans have been impacted by COVID-19 and its economic consequences. Many workers have been forced to put a hold on new contributions to 401(k) or other retirement savings plans, which has resulted in a big opportunity cost in terms of lost future retirement income. Some pre-retirees have even delayed retirement altogether or had to reimagine their plans to consider part-time work to improve their savings.
The pandemic also widened the existing retirement security gap for women and communities of color in particular – groups that have historically struggled with less job security, incomes and savings. In 2020, two-thirds of single Black retirees—and three-quarters of single Latinos—had incomes below the Elder Index, according to data from the University of Massachusetts Boston.
So, if your retirement savings progress has been sidetracked, don’t panic. It is never too late to re-start saving for money you will need in retirement.
5 Steps That Can Help You Catch Up And Have Enough Money For Retirement
1. Track your spending. Make a list of everything you own (money in bank accounts, financial investments, equity in real estate and other assets) and everything you owe (credit card debt, auto loans, mortgage). Determine what your average monthly expenses are going to be in retirement and be realistic about what income you will need to comfortably cover them.
2. Make a plan, then save and invest accordingly. If there is a gap between what you have and what you need, it’s time to roll up your sleeves and get to work. The Check Off the Basics approach can help you discover ways to help cover your essential expenses—things like a mortgage, utilities, food and transportation—with protected income. When you’re able to cover those basic expenses with income you can always count on, among other things, you won’t have to worry about running out of money in retirement, which could last 20, 30 or more years.
3. Plan for the worst-case scenario. Make sure you re-build your emergency funds—preferably up to one year’s worth of your essential monthly expenses—in cash or highly liquid investments. Workers in their 50s and 60s should also make contingency retirement plans so they are financially ready in the event of an unplanned retirement.
4. Consider Waiting to Claim Social Security. You can start collecting your Social Security benefits at age 62. But unless you absolutely need to, should you? If you’re able, claim your Social Security benefits after your “full retirement age” for—which is between 66 or 67, depending on which year you were born. That will give you more time to save. You can receive the largest benefit each month by claiming at age 70. For some, protected income from an annuity may be a good option to create an income “bridge” which would allow you to wait and claim your maximum Social Security benefit at a later date.
5. Work with a financial professional. While retirement planning can seem confusing and overwhelming, in today’s world, it is vitally important. It’s best to work with someone who understands the nuances of the many choices and can work with you to achieve your retirement dreams and goals, so you can live the life you want.
To learn more about how to jump start your savings and protect your retirement, visit protectedincome.org.