Retirement Strategies

Retirement planning is an industry, and within this industry, there are experts. Experts in the retirement planning industry all see the bigger picture every day, according to the Transamerica Center for Retirement Studies, a non-profit research group. 

They see that in 2021, 22 percent of Americans have less than $5K saved for retirement, and 15 percent have nothing. 

They see that 55 percent of retirees plan to work in retirement because 35 percent didn’t save enough. 

They see that Millennials clock in at 70 percent stressed out about savings and retirement, and 43 percent don’t think they’ll have anywhere near ever enough to make it happen.

Nevertheless, retirement planning industry experts all agree on the one solid piece of advice for every worker right now who hopes to retire comfortably, regardless of income or age, when they all say, “Start your retirement planning early.”

couple talking at table

How to Optimize Social Security Retirement Benefits?

You might not know this, but if you wait until you’re 70 before you tap into your tax-free pension from the Social Security Administration, you’ll get a permanent 8 percent monthly increase from then on for every 12 months you delay benefits. 

Regardless of where you work, once you hit 62 years old, you can retire and start receiving a reduced percentage of your Social Security benefits, though if you wait until 67, you’ll get the full 100 percent retirement check you deserve. 

However, on their own, these checks will struggle to cover the costs of your retirement. In 2021, the average monthly Social Security benefit for retired workers was $1,543. 

But suppose that amount is coupled with a 401(k) or an Individual Retirement Account, as well as a Health Savings Account and some smart savings goals as part of an adaptive retirement strategy? In that case, most workers can retire with multiple sources of income in their later years and use Social Security strategically when needed.

How much can you save before 70? Use this DECU Retirement Savings Calculator to get a clearer picture of where you stand. 

How Much Can I Spend in Retirement?

How much monthly income will you have at the start of your retirement? Use this DECU Retirement Income Estimator to see what you might be getting. 

Keep in mind your retirement might last 25 years and perhaps even longer. How does this change how you budget your spending to make the most of your income while still active and vital? 

Author Steve Vernon wrote a book entitled “Don’t Go Broke in Retirement” and filled it with smart, no-nonsense tips on stretching dollars and making them last. 

But the statistics in Vernon’s research were a surprise when he discovered a study from the Center for Retirement Research at Boston College showing that many retirees struggle to shift from saving to spending.

In short, Vernon says, some folks retire and then continue to live frugally in anticipation of an unexpected and potentially expensive rainy day.

In response, Vernon and his team of researchers at Stanford University’s Center on Longevity came up with a few tips they came to call the Spend Safely Strategy.

  • Optimize and delay Social Security payments if you can until age 70
  • Invest your savings in a low-cost balanced, target date, or stock index fund 401(k) or IRA
  • Set aside some money for an Emergency Fund, apart from your retirement savings

Vernon also recommends that retirees pay for living expenses with money safely withdrawn from a 401(k) or IRA as determined by the IRS’s required minimum distribution rates (RMD). 

couple in kayak

Break-Glass-In-Case-Of-Emergency Strategy for Early Retirement

What if you’ve started your retirement savings late, and suddenly the world is upside down? DECU has published a Strategy for Late Starters to help you take advantage of catch-up contributions and even some creative tips for converting non-earning assets into retirement savings.

In 2020 the Covid-19 virus accelerated a trend, showing nearly half of retirees retired earlier than expected, according to the 2021 Retirement Confidence Survey published by the Employee Benefits Research Institute.

Some workers left early due to health concerns, others because of layoffs. An economic and employment rebound in 2021 has extinguished most worries over virus-based job loss, but the EBRI heartily encourages workers in their 50s and 60s to start making contingency retirement plans.

  • Pay off debt while still working; credit cards, student loans, even mortgages
  • Plan for health care coverage to bridge the gap until 65 when Medicare kicks in
  • Health Savings Accounts are tax-deductible, grow tax-deferred annually, and withdrawals for medical expenses are tax-free. DECU’s HSA has no minimum balance requirement 
woman using laptop

Ease Into It

Perhaps the second-most frequent piece of advice offered in the Retirement Planning Industry is a plain and simple “Don’t Panic,” and for a good reason. Only a minority of workers expect to retire immediately after their final day.

According to the Transamerica Center for Retirement Studies’ Annual Report, nearly half of all workers expect to keep putting in a few hours at some kind of paid labor for a while once retirement starts. 

And why not? Easing into retirement and generating income while you adapt can be a real help in stretching out your budget. 

Let’s assume you have an even $500,000 saved for retirement, and you plan to live on $60,000 per year. It may seem shockingly short, but that’s 11 years fully funded.

However, if you work a bit in the early years of your retirement and scale back your payments to $48,000 per year, you could just as easily top out at $60,000 in earnings anyway, and your untouchable, fixed-income would stretch to cover 18 years fully funded.

DECU’s online calculator can calculate these variables for you when you want to know How Long My Retirement Savings Will Last

Whatever you choose, the future is inevitably coming. DECU is ready to help you face it head-on.