Catch-Up Retirement Planning-Part 2

Even people in their 50s with little or nothing invested have opportunities to make up for lost time. So, if you’re beating yourself up about what you haven’t done to prepare for retirement, it’s time to stop and, instead, take action to create a bright future.  There are many ways for late savers to make up for lost time. 

As noted in my previous post, catch-up retirement planning strategies basically fall into one of two basic categories:

• Take action before retirement to increase retirement savings

• Take action after retirement to decrease the amount of savings required
   
  Below are five catch-up retirement planning strategies in the “decrease amount of savings required” category:
   

• Trade Down to a Smaller Home- When someone downsizes, proceeds from the sale are available to invest for future income and maintenance costs, property taxes, and utilities on a smaller property are generally reduced.

 

• Move to a Less Expensive Location- So-called “geographic arbitrage” (i.e., moving from a high-cost area to a less expensive area) can substantially reduce living costs and reduce the amount of money required to save for retirement.

 

• Use a Reverse Mortgages or Sale-Leaseback Arrangement- Both of these catch-up strategies can help late savers convert their home equity into spendable cash without having to move. The former is a loan against equity built up in a home and the latter involves selling a home, typically to a close family member, and leasing it back as a tenant.

 

• Delay Retirement Age- Continuing to work, even just a few years, provides two benefits: more time to invest for retirement and to allow previously saved assets to grow, and fewer years in retirement during which money is spent.

 

• Work After Retirement- Semi-retirement, with at least some paid employment after leaving a pre-retirement job, reduces the amount of money needed to be withdrawn from investments to supplement Social Security and/or a pension. Continued employment also provides opportunities for socialization and a sense of purpose.