We all know why having a retirement savings plan is essential. Financial planning will help you use your retirement benefits for your living expenses and maintain your lifestyle after retiring. Without a lump sum of retirement funds as a nest egg, maintaining a sustainable annual income can be difficult. You may end up becoming too dependent on your kids and family.
So, retirement income is this amount you have in savings accounts, tax-free benefit plans, investment accounts, or an individual retirement account for the latter years of your life. Every person has different needs for pre-retirement income, and the same is true for sources of retirement income. This means that monthly benefits in retirement can vary from one person to another.
You may be thinking that Social Security payments or a government pension plan will cater to your needs. But then, it might not take you long before you start looking for alternatives. It would be best to have retirement savings to ensure you have some security after retirement.
The most challenging task for many people is deciding on a good retirement income. As said before, the amount to save is unique. This article will explain more about retirement income. It will help you start saving into your retirement account today.
Let’s get started.
What Is the Average Retirement Income?
We have answered the question “what is retirement income?” beyond dispute. We want to help you decide the best amount to have in your retirement account and know what to expect when you start receiving required minimum distributions (RMDs). We have already mentioned that determining how much will be enough can be daunting.
Most people rely on social security benefits from the federal government for their retirement annuities. But according to the Social Security Administration (SSA), these benefits aren't enough. They make up for about 33% of what one needs after retirement.
Thus, your personal finances should be the primary income source. Social security benefits are there to supplement. Savings will make your life easier if you have dependents and health care expenses on top of your cost of living,
You should ensure your savings fund is above the average retirement income. A 2020 report by the U.S. Census Bureau indicates that Americans above 65 years old have an average income of $73,288 and a median income of $47,357.
Even though these numbers differ from one person to another, keeping them in mind will be a good idea. They'll help you make the correct projections. In the end, you'll save enough to keep you afloat.
Also, it's worth mentioning that there are various ways to save. And how you save matters. You may decide to do it by creating a retirement account. But some people do it through investing.
You won't go wrong with either. For savings, you have several options to consider. You can save in a tax-deferred IRA with options like a Roth IRA and a traditional IRA. Or, you can consider a 401(k) also for savings.
Investing is another excellent idea for retirement savings. You can consider various assets and businesses when doing this. It has to be something that generates income and preserves value.
If preserving value is top on your list, consider gold. This asset never loses its value even when there's economic turmoil. You can consider investing in gold as you wait for your retirement.
Gold gives you various investment options. You can put money in it by investing in stocks of gold mining companies. Also, you can consider investing in physical gold like bullion bars and coins.
Whatever option you consider, you won't go wrong with gold. But you’ll first have to invest in a good investment strategy. You can speak with financial advisors and investment planners for the best gold investment advice.
Determining How Much To Save for Retirement
As mentioned earlier, everyone works with a different figure when saving for retirement. The following factors can help you determine how much you should save if you are getting started.
Estimated Expenditure During Retirement
You'll have done most of the work if you can estimate your expenses. Three options come with retirement. You can lower your lifestyle, maintain it, or make it more luxurious.
So, what are your needs and preferences after retirement? Your retirement account should be able to accommodate them. But you should not lower your lifestyle too much because these golden years are to be enjoyed.
For instance, retirement leaves you with more time for traveling. Also, you may have a health condition that requires regular medical attention. Your retirement account should cater to these expenses.
Returns on Investment
As mentioned earlier, investing is an essential step in retirement planning. But your investments should be earning you some money in the long run. It would be best if you estimated how much an investment earns.
For instance, you can identify a business that will generate income. It needs to be an investment in your hobby or anything else you're passionate about. This will make it easier to run without feeling bored.
Also, you can start thinking about investing in assets like gold. You can invest in gold bars sold by dealers like Acre. Or, you might also consider buying gold coins or jewelry to store value.
Your Life Expectancy
You can never tell how long you’ll live. But there are averages that you can use to estimate this and create a good retirement plan. According to the CDC, Americans have a life expectancy of up to 77.0 years.
These are the numbers that should guide you. They are guesses from data, but you cannot overlook them. Also, you can look at the life expectancy in your family. It will also provide a good hint.
For instance, you may consider your family’s health history. This can help you plan and save enough to cater to treatment when needed. Also, it will ensure you do not struggle to sustain your lifestyle.
Your Withdrawal Rate
It's also a good idea to consider how often you withdraw from your account. Your savings may not take you far if your withdrawal rate is high. This is if you depend on the savings for survival.
You can start training yourself to be conservative with withdrawals. It will help trim your expenditure and ensure your savings last longer. This will give you a better chance of maintaining your lifestyle for longer.
Another decision you can make is delaying your retirement. The longer you take to retire, the more you maximize social security benefits. You will find it easier to determine how much to save in your retirement account.
Once you determine all the factors discussed above, it'll be easier to save for retirement. It'll also help you make informed decisions, for instance, investment decisions. These decisions will impact your lifestyle after retirement.
How To Boost Your Retirement Income
Saving for your retirement is vital. But you need always to ensure that you increase your retirement income. Early savings are one way to ensure you get the desired results with your income.
Here are some tips to keep in mind and increase your income and retirement savings.
- Start by setting your goals on how much to save.
- Consider how much interest you'll get and start saving immediately to maximize it.
- Talk to your employer about your 401(k) and start contributing
- Cut down your expenditure
- Delay your social security benefits until your full retirement age
- Open a Roth or traditional IRA
- Automate your savings
- Diversify your portfolio using investments like gold bars and coins
- If you are over 50, start making catch-up payments to your retirement account.
- Have a passive income source to boost your income
These tips can help you start increasing your income. You can use them to boost your current and retirement income. Also, consider increasing the amounts you save to your retirement account.
In the end, it will be easier to grow your savings and fund your lifestyle. Besides, you will find it easier to be more independent in the future. It'll be easier to take care of your dependents if you have some.
Now you have all you need to know about retirement income. This article has defined it to help you understand it better. You can now start setting money aside to ensure a smooth retirement.
We have discussed the factors you should consider when deciding how much to save. You now have a hint on the amounts to target to ensure you achieve your retirement savings goals.
The tips shared here will make your journey to saving easier. It is vital to keep them in mind when starting and along your investment journey.
Also, we've shared some tips to help boost your income. You cannot talk about saving enough for retirement if you don't make enough money. That's why you should invest in businesses and other assets.
We have also discussed some of the best investments you can consider. For instance, you may decide to invest in gold, giving you various investment options.
You might choose to buy stocks in companies that sell gold. Or, you can invest in physical gold like bars or coins. All these give you a chance to store value. You can contact us for advice on how to invest in gold bars. We will help you get started and even grow your savings for a better future.
Social Security Definition | Investopedia
Social Security Basic Facts | SSA