Although we should begin preparing for retirement as early as possible, many start preparing late in life when there is no other choice left.
If you are in your mid-50s and are just beginning your emergency retirement plan, here are a few tips to get your retirement on track.
Downsize your life
Excess, materialistic mindsets and spending money on unnecessary items are indulgences for the young.
As a retiree, you need to make your dollars stretch as far as possible, not items, assets, or properties that you may need to pay additionally for upkeep and maintenance.
Downsizing is the act of scaling down every unnecessary expense in your life. So, you can start by inventorying what you need and want in your life.
You can decide to sell a house and move into a small apartment. Or to sell a car or do your homework and buy one with a fuel economy that benefits your lifestyle.
Instead of paying rent for items in a storage locker, you can sell all your items. Start buying off-brand and generic items and food.
Catch-up contributions to retirement plans
If you have a job that offers a retirement plan, then you should take full advantage of the catch-up contributions that are available.
The IRS allows people 50 or older to put additional money to work in retirement plans such as IRAs, above and beyond the normal annual limits.
If you are over age 50, then you can contribute extra to your 401(k) plan as well.
Delay Social Security
If you have a reliable income, you can opt to delay receiving Social Security until age 70 at the latest.
The average Social Security benefit is $1,600 monthly. If you defer receiving Social Security until 70, you will receive 132% of your standard benefit.
Choose this option wisely. If you have health problems or irregular income streams, however, delay may not be the best choice.
Watch out for potential withdrawal penalties
Working-class retirees with low incomes, and especially those who depend on Social Security as a sole income, don’t pay taxes on their benefits in most cases.
However, if you make above certain limits your Social Security benefits can be taxed by as much as 85%.
If you try withdrawing from an IRA before age 59 ½ you pay 10% in taxes and penalties.
Confer with a financial adviser to learn your post-retirement tax liabilities.
