Retirement Download
Posts
👴 Strategies for financial security

👴 Strategies for financial security

and boosting retirement income

Michael Wight, Jason Phillips & Trajan King
October 18, 2024

In partnership with

Retirement Download

Strategies for a successful retirement

Boosting Retirement Income: Strategies for Financial Security

Over 60% of individuals aged 50 and above are concerned about not having sufficient funds to sustain themselves during retirement. In fact, a recent survey of retirees revealed that nearly half (44%) described their financial situation as "comfortable," while another 34% said it was "not great but not bad," and 15% reported they were "struggling."

For a happy retirement, you need to start planning now.

Only 45% of non-retirees feel confident they will have sufficient funds to cover their living expenses in retirement. In contrast, 79% of retirees report having enough money to maintain a comfortable lifestyle. This disparity suggests that consistent saving and smart financial planning can lead to positive outcomes for those who prepare adequately.

The Reality of Retirement Savings

Approximately 57% of Americans feel they are falling behind on their retirement savings, and many are uncertain about the future of Social Security. Over 60% of workers are contributing the same or more to their retirement savings compared to last year, while 37% are contributing less. Additionally, nearly half (48%) of those with a retirement savings goal doubt they will reach their target.

According to the National Institute on Retirement Security, approximately 66% of working Americans have less than $10,000 saved for retirement. However, those who have engaged in proactive saving and investment strategies often report a more favorable financial situation. For example, retirees who consistently contributed to a 401(k) or IRA tend to have greater financial stability, allowing them to cover medical expenses and leisure activities without stress.

Here’s what you can do to improve your situation:

Key Strategies to Enhance Retirement Income

1. Maintain Stock Investments

Many retirees instinctively sell off their stock holdings to avoid market volatility, fearing losses during their retirement years. However, completely divesting from stocks can hinder growth potential. Maintaining a portion of stock investments is crucial for long-term financial health.

For instance, a 65-year-old retiree with a diversified portfolio that includes stocks may see an annual return of about 7% over the next 20 years. By contrast, those who opt for a conservative approach, selling off stocks entirely, may miss out on potential growth.

Dividend-paying stocks can also provide a reliable source of supplemental income during retirement. For example, a retiree holding 100 shares of a dividend-paying stock valued at $50 per share, with an annual dividend yield of 4%, would earn $200 annually—an important addition to their income stream.

We identified some great retirement stocks, including some with over 10% yield, in the previous issue, so make sure to check it out.

2. Delay Social Security Benefits

Social Security benefits become available in full once an individual reaches their full retirement age, which is 67 for those born in 1960 or later. However, delaying the claim can significantly increase monthly benefits. For each year that benefits are postponed beyond full retirement age, the amount increases by 8%, up to age 70.

For instance, a person eligible for a monthly benefit of $1,500 at age 67 could receive approximately $1,980 if they delay until age 70. This 32% increase can ease the pressure on retirement savings, allowing funds to last longer. Moreover, the Social Security Administration reports that delaying benefits can result in over $100,000 more in benefits over a retirement lifetime for those who live into their 80s or 90s.

We talked about this in detail in a previous issue, so check it out too.

3. Explore Gig Economy Opportunities

Engaging in side jobs or freelance work is beneficial not just for younger generations but also for near-retirees. The gig economy offers numerous opportunities for flexible work that can supplement retirement income. A huge number of of workers aged 50 and older engage in some form of gig work.

For example, a retiree who starts a consulting business in their area of expertise might earn an extra $1,000 per month. This additional income can serve as a financial buffer, allowing individuals to save more without relying on that income for everyday expenses. Moreover, getting accustomed to part-time work before retirement can make the transition smoother and provide ongoing income during retirement.

Check this video for some more tips:

4. Create a Comprehensive Budget

Developing a detailed retirement budget can help individuals better understand their income needs and spending habits. This budget should include fixed expenses like housing, healthcare, and utilities, as well as discretionary spending on travel and leisure activities. Research shows that retirees often underestimate their expenses, which can lead to financial strain later on.

5. Take Advantage of Retirement Accounts

Maximizing contributions to retirement accounts such as 401(k)s and IRAs is vital.

The 2024 contribution limit for 401(k) plans has increased to $23,000, up from $22,500 in 2023. Individuals aged 50 and older can contribute an extra $7,500.

These tax-advantaged accounts can significantly boost retirement savings over time.

Conclusion: Preparing for a Secure Retirement

To ensure financial stability, focus on increasing savings in the years leading up to retirement. This can be achieved through mindful spending, taking advantage of additional income streams from side gigs, and strategically managing investments and Social Security claims.

Adopting these approaches not only enhances retirement income but also provides individuals with greater peace of mind. By actively engaging in financial planning, retirees can create a secure and fulfilling retirement experience, allowing them to enjoy their golden years without financial stress.

Whiskey: A Hedge Against Market Volatility

Looking to protect your portfolio from the next recession?

Consider investing in rare spirits like whiskey.

Whiskey investing provides a proven hedge against stock market dips driven by inflation and other factors.

With Vinovest, you can invest in high-growth segments such as American Single Malt, emerging Scotch, Bourbon, and Irish whiskey. Thanks to established industry relationships, Vinovest overcomes industry barriers that have made historically whiskey investing expensive and opaque. As a result, you can enjoy high-quality inventory that boosts your portfolio value and enhances liquidity.

Schedule a call with a Vinovest advisor to learn more.