By Stephen Fournier, President, Central New York Market, KeyBank
Retirement. This simple word brings thoughts of long vacations, time with family and friends and enjoying the simple pleasure that comes along with doing what you want to do and not having to deal with the day-to-day stress that work brings. One key to a stress-free retirement is being able to afford the lifestyle you’ve worked so hard for.
These days, people are living longer and you need a strategy to ensure you have savings and income that will continue to grow and last long into your golden years. A recent study by the Society of Actuaries shows the expected longevity for men and women at the typical retirement age of 65 has jumped more than 10 percent since 2000. Men who reach age 65 can be expected to live to an average age of 86.6, and women to 88.8.
Fortunately, there are some relatively simple things you can do to maintain income, preserve your savings, and enjoy your retirement.
Establish a Budget
We all budgeted when we were young and had families. But making sure you’re not spending more than you take it is still important, if not more so, in retirement. Look at where your money is coming from: 401k, pension, social security, or part-time work, and make sure you’re not spending more than you’re taking in. HelloWallet, KeyBank’s digital financial wellness tool, can help you see where your money is going and help you stay on track.
Have a Social Security Strategy
Although you can claim benefits as young as 62, waiting may prove to be more lucrative in the long run, if you can afford it.
Social Security benefits are calculated using a formula called the primary insurance amount, or P.I.A. Waiting until your full retirement age (currently 66), you’ll receive 100 percent of P.I.A.; every 12 months that you delay beyond that point, until age 70, tacks on an additional eight percent.
Adjust Your Income
Believe it or not, retirement doesn’t mean giving up work completely. Many still find a healthy balance doing what they want while still taking on part-time work. This is a great way to stay active, be around people, and increase your income. If you find the right job, it can be a lot of fun! Just be sure to keep in mind that if you’re employed after receiving social security benefits, eligibility for full payment becomes a little complicated. Alternatively, you might want to consider making one of your dreams a reality and start a small business.
Pay Down Debt Sooner Rather Than Later
You’ll quickly outlive your retirement savings if you don’t work to pay off any debt you have as soon as possible. When setting your goals, try to pay off big debts — like your mortgage — completely so you have better cash flow.
For example, paying down your mortgage ahead of schedule is a great way to reduce the amount of interest you pay each month. But until you pay off the mortgage, you still have the monthly payment detracting from your monthly cash flow.
Consider Relocating
Moving out of a home you love is a difficult choice to make. But relocating to a more affordable area comes with a lot of upside.
First, if you’re selling a home and have equity, you can use that cash for your move. Plus, if done properly, your move should decrease your overall living expenses while your income remains the same. Moving into a more affordable home doesn’t have to mean going far away either. If living expenses in your current area are already within your budget, you can downsize to a smaller home without having to change towns or states.
However, there are tax implications on both sides of the coin. You could owe taxes on the sale of your existing house if you have a large enough gain. Alternatively, there are also tax breaks if you finance part of your new home. Whatever you do, make sure you talk to your financial advisor who could help you with some guidance.
Taking time to look at your full financial picture can increase your overall standard of living in retirement. By employing a smart strategy that involves savings and income, you can have peace of mind for years to come.
About the author: Stephen Fournier is president of KeyBank’s Central New York Market. He may be reached at either 315-470-5096 or [email protected].
What to Do With Your Loose Change
Many of us are sitting on a small fortune and don’t even know it. That loose change in your pocket, under your car seat and couch cushions adds up. In fact, recycling and waste management company Covanta Holding Corp. estimates Americans throw away $62 million in loose change each year – $62 million!
Instead of throwing it away or forgetting about it, put your loose change in a jar or piggy bank and then put it to work for you. Here are some ways loose change can help you meet your financial goals.
Attach One Savings Goal to It
The trick with accumulating enough coins, to make a difference to the goals you want to save for, is to set one goal at a time (since it’ll most likely take a while to get there). Once you meet that goal, you can go ahead and set a new one.
For example, instead of using money from your paycheck to pay for spending money on your next vacation — or to cover your annual anniversary date night — experiment with using your loose change to do so. By designating one meaningful way to spend the change in your life, you’ll really start to see the power of all those pennies, nickels, dimes, and quarters.
Give It a Higher Purpose
Perhaps charitable giving has not been at the top of your budget’s priority, even though it’s definitely at the top of your personal priority list. Collecting your loose change and designating it to one specific charity that is near and dear to your heart can create change while also making you feel good.
A study on generous behavior found that a person planning to give away a little bit of money had the same positive effect on their happiness as a person planning to give away a lot.
Use It to Teach Kids About Money
Whether you’re a parent yourself or the “cool” aunt/uncle, you can use the spare change you’ve accumulated to inspire the little ones in your life to get excited about money. Depending on the kids’ age, you could ask them to help you roll the different coins up for a bank deposit. While rolling, work with them on identifying each type of coin and how much it’s worth.
Instead of having to run to the ATM each time you owe the kids for commissioned chores, you can use the loose change you’ve collected.Using any of the strategies above will help you turn your loose change — something many adults just graze over — to help you meet one of your larger money goals.
