If you’re like most Americans nearing retirement age, you may be wondering if you can afford to retire. The decision to give up a steady paycheck can be a daunting one.
Hopefully you’ve been saving up for retirement and have a little nest egg built up. But like many people nearing retirement, you probably have many questions running through your head as you decide when to make the momentous decision to stop working.
Can I Afford to Retire Soon?
Being able to afford to retire requires having income that you know will be enough to sustain you in retirement. Without a regular paycheck coming in, you’ll be dependent on what you’ve invested, or any benefits you may be promised. If you’re fortunate enough to have a job that pays a pension in retirement, that could help, but you don’t want to put all your eggs in that basket. If your former employer goes under or otherwise can’t afford to honor its pension obligation, you’ll find yourself in a tough situation. Those who are lucky may find their pensions being covered by the government’s Pension Benefit Guarantee Corporation (PBGC), but even so they may only receive pennies on the dollar, if anything at all.
Similarly, Social Security can’t be relied on for survival either. The benefit checks from Social Security are small to begin with, and the annual benefit increases fail to keep pace with the ever-rising cost of living. And because Social Security is actuarially unsound and will soon begin to pay out more money than it takes in, it will eventually collapse. Those who rely on Social Security as their sole source of retirement income need to be aware of that and protect themselves from that eventuality.
To really be safe and secure in retirement, you need to have your own savings. Whether that’s a 401(k), IRA, savings account, mutual funds, etc., ultimately the safety and security of your retirement is your responsibility.
Do I Have Enough Saved?
It’s better to save too much than too little. If you have more money than you need, you can always spend more or pass money on to your heirs. But if you run out of money during retirement, it will be next to impossible to make more. Retirement planners often recommend that retirees assume that they’ll need an income of between 70 and 80 percent of their pre-retirement income in order to maintain the same standard of living.
If you haven’t saved up enough money, it’s not too late. Individuals who are 50 years old or over are eligible to make catch-up contributions to their IRAs and 401(k)s. So even if you’ve missed out on two or three decades worth of interest compounding, you can still take advantage of the “eighth wonder of the world” for the last few years of your career.
How Do I Make Sure the Money I’ve Saved Will Last?
While many people think that they have a good grasp on what their expenses might look like during retirement, they often forget to factor in the rising cost of living. As long as the Federal Reserve continues to create new money and credit, prices will rise. Inflation is a reality that retirees will have to face and plan for when estimating how much money they will need in retirement. Even though official inflation figures are a little over 2% right now, it can’t hurt to plan for higher inflation rates.
Many people also underestimate their health care expenses. As you age, you can expect to make more trips to the doctor, take more medications, and pay more for health insurance. Forgetting to factor in that increased cost could lead to you running down your retirement savings quicker than you had hoped.
And of course, the government wants to take its cut of your retirement income too. Unless you’re totally reliant on Social Security, you’re going to have to continue paying taxes in retirement. Underestimating or ignoring your income tax liability could lead you to save less than you need to, and could really hurt your ability to live your golden years worry-free.
Slow But Steady Wins the Race
Retirement is not the time to invest in junk bonds, technology startups, and other high-yielding, risky ventures. Once you have to start living off what you’ve saved, you want to make sure that your money is invested in such a way that you’ll be able to live comfortably throughout your retirement. Your investment focus should prioritize retaining the wealth you’ve already accumulated over trying to make rapid gains.
One of the most effective ways of maintaining your wealth is by investing in gold. Unlike cash, which is devalued by inflation year after year, gold protects your savings against inflation. Gold maintains its purchasing power over time, ensuring that your retirement assets will continue to afford you the same standard of living that you currently enjoy. Gold has been in demand for thousands of years and it will continue to be in demand for centuries to come. Because there’s always a demand for gold, its price never fluctuates wildly like stocks or bonds. While the spot price of gold varies day by day, the long-term trend is always upward.
Gold has always served as a safe haven in times of financial crisis, maintaining its value and even increasing in value during tough economic times. That makes it a great asset to own as you get older so that your retirement savings won’t be decimated by a stock market crash.
It’s never been easier to invest in gold through a Gold IRA. Gold IRAs offer all the tax advantages of traditional IRAs, while also offering all the benefits of owning gold. If you want to hedge against a stock market collapse, or if you’re facing a mandatory 401(k) rollover, investing a portion of your assets into a gold IRA will ensure that you have a solid, long-term asset to help your assets maintain their value for the duration of your retirement. That should give you some peace of mind and result in a little less questioning about your financial security once you leave the workforce.
Trevor Gerszt is America's Gold IRA Expert, CEO of Goldco Precious Metals, and holds a position on the Los Angeles board of the Better Business Bureau.
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