Saving for retirement is a lifelong project, and experts’ recommended savings goals can be daunting. Bank of America recommends you have more than nine times your current salary stashed away in savings by the time you reach age 61. Even then, the bank says your savings will only replace about 40% of your pretax income.
By this rule of thumb, if you make $50,000 a year, you should have $450,000 in the bank. Those making $100,000 should aim for savings of at least $900,000. However, those amounts are far out of reach for some pre-retirees.
“Some people get bad breaks,” says Steve Azoury, owner of Azoury Financial in Troy, Michigan. They may encounter illness, unemployment or other events out of their control that make it difficult to save. “It’s not their fault,” he notes.
Perhaps you find yourself in this situation and only have $100,000 saved by the time you reach retirement age. In that case, use these tips to make the most of the money you have:
— Tally and reduce monthly expenses.
— Utilize free services.
— Consider working longer.
— Be strategic about Social Security.
— Tap into your home’s equity.
— Keep your money invested.
— Talk to a finance professional.
[Related:Ways to Enjoy Retirement on a Reduced Income]
Tally and Reduce Monthly Expenses
If you only have $100,000 saved when you retire, it’s crucial to understand how much money you need to live on each month. “These assets probably won’t last the amount of time that you’d like,” says John Traynor, managing director and senior wealth planner at Fiduciary Trust International in New York City.
Track your spending and add up all your typical purchases and bills for a month to determine a target monthly retirement income. Then, see if any costs can be reduced.
For instance, your household may not need two vehicles after retirement. You can also shop around for cheaper insurance, pare down streaming services and dine out less frequently to reduce monthly expenses.
Utilize Free Services
One way to reduce monthly expenses is to maximize your use of free services. These can vary by location but may include free meal sites, transportation services and medical assistance programs.
Many museums, zoos and similar venues have free senior admission days and discounts, and the National Park Service offers a reduced-price senior pass for admission to more than 100 of its locations. Don’t overlook your library as a source of free entertainment, including movie and music streaming services, classes, Wi-Fi hotspots and more.
Contact your state or community’s agency on aging to see what resources are available in your area. These organizations may also help evaluate whether you qualify for income-based programs such as Medicaid, housing assistance or food assistance.
Consider Working Longer
Once you know how much you spend each month, you’ll need to ensure you have enough money in retirement to cover your costs. “The key is, of course, replacing the paycheck,” Azoury says.
A common rule of thumb is to withdraw no more than 4% of your retirement savings each year to ensure your account doesn’t run dry. That only gives you $4,000 per year out of your $100,000 savings. Assuming you receive average Social Security benefits — which were $22,000 per year as of June 2023 — that provides $26,000 in annual retirement income.
If $2,200 a month won’t cover your expenses and you don’t have another source of income such as a pension, then you may want to work longer. Azoury suggests transitioning from your current workplace slowly or picking up seasonal employment to help make ends meet.
[See: In-Demand Jobs for Seniors]
Be Strategic About Social Security
Most workers are eligible for Social Security retirement benefits. Payments can begin as early as age 62, although at that age, they will be reduced by as much as a third. Meanwhile, those who wait to start benefits until after their full retirement age — 66 or 67, depending on a person’s birth year — can get an 8% boost in their payment amount for each year they wait until age 70.
“Most of the time, you want to defer as long as possible,” Traynor says.
It could be different, though, if you have limited savings and working longer is not an option. “It may make sense at that point to tap into Social Security benefits early in order to avoid putting yourself into debt,” says Mindy Yu, director of investing for 401(k) provider Betterment at Work.
Tap Into Your Home’s Equity
Your home may provide another source of income in retirement, particularly if you don’t have a mortgage. One way to tap into equity would be to sell your home and downsize to a cheaper location or property. Pay cash for the new home and pocket the remainder to supplement your retirement savings.
Older homeowners may also be eligible to take out a reverse mortgage. This loan product can provide monthly payments based on the equity in a house. Once the homeowner moves or passes away, the home is typically sold to pay off the loan balance.
“I typically don’t recommend them,” Traynor says. However, he says they may make sense for those who have few other income options in retirement.
Keep Your Money Invested
Once you reach retirement, don’t make the mistake of moving all your savings out of the stock market.
“You need part of that to still grow,” Azoury says. He recommends people use a bucket approach and put money aside for short-term, mid-term and long-term needs.
For instance, someone with $100,000 may want to move $20,000 to a cash account where it would be safe from stock market swings while leaving $40,000 in mutual funds where the balance could grow. The remainder could be placed in a more conservative investment where it would earn interest but be relatively protected.
“People tend to live longer, and they underestimate the amount of growth needed with their investments,” Yu says. “So, they tend to be too conservative too quick.”
[Related:7 Best Funds for Retirement]
Talk to a Finance Professional
While some people prefer to manage their own investments, an experienced professional can provide valuable perspective.
“When in doubt, make sure you’re seeking advice of a financial planner,” Yu says.
Even paying for a single consultation can be money well-spent if it helps you develop a smart strategy to stretch your savings over a retirement that could be decades long. If you only have $100,000 in the bank, make every dollar count.
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How to Retire on $100,000 originally appeared on usnews.com
