If you’re barreling toward retirement, but have just $250,000 in savings, don’t throw in the towel.
There are ways to efficiently make that money work for you in your golden years. You’ll need some external financial help, but that’s a job that can be accomplished — if you plan right.
Take these action steps to get where you need to be with less-than-optimal retirement savings.
1. Get an annuity.
2. Use catch-up retirement plan contributions.
3. Leverage your home.
4. Stay in the workforce.
5. Balance your budget with safe investments.
[READ: Avoid Becoming One of These Retirement Statistics]
Get an Annuity
If you’re in good health or have a history of longevity in your family, consider an annuity.
“An annuity is essentially a personal pension,” says Douglas Ornstein, senior integrated solutions manager at TIAA Wealth Management. “You give money to an insurance company, and they give you a paycheck for life.”
But it’s not a good idea to put all your savings into an annuity since you’ll need access to liquid funds for unexpected costs down the road.
“If you’re in this situation, you should start with looking at your budget and see what you need to live on,” Ornstein says. “Anything you don’t need is a want, and you’ll need to do some prioritizing. Once you know what you need, next talk to a financial advisor who can help you optimize the savings you do have to last you to and through retirement.”
Use Catch-Up Retirement Plan Contributions
Most qualified retirement savings plans offer a catch-up provision for age 50-plus Americans.
“For IRAs, that catch-up is $1,000, and for 401(k)s and 403(b)s, the catch-up is $7,500 (for 2023),” Ornstein says. “That extra savings, for even just a few years, can make a huge difference down the road.”
“If you’re behind on saving for retirement in your 50s, this is the time to really buckle down and make up for lost years by taking advantage of these provisions,” Ornstein adds.
Leverage Your Home
If you own a home, you can either liquidate the property or downsize your home. “Roughly 70% of older Americans’ net worth is in (home) equity,” says Jason Van Den Brand, CEO and co-founder of Wellahead, a marketplace for families to get funds for care.
If you’re a homeowner and want to stay in your home without having to sell and move, you have options.
“You could look into a home equity line of credit, home equity investment or sale-leaseback, all of which compete with the reverse mortgages, which have vastly improved since the 1980s,” Van Den Brand says. ”
“If you aren’t a homeowner but have a life insurance policy, there could be an option to sell that as well,” he adds.
[Read: Best Home Equity Loans.]
Stay in the Workforce
Depending on the person, their health and ability, and their employer, staying on the job can bring in more cash.
“If the individual is a valued employee and he or she brings more profit to their company than replacing them with a cheaper person, the employer may want to keep them on,” Van Den Brand notes. “Some retirees may also be asked to move into an independent contract role since they can then receive medical benefits from the government at age 65, making them less expensive for their employer and therefore more attractive.”
In a competitive business climate, many employers want to keep a solid performer who knows how to do the job and is willing to train greener peers.
“We work with clients where retiring three to five years later makes a huge difference in whether they’re able to successfully afford to retire the way they want,” Ornstein says. “Retirement as a concept is only a few generations old, so we’re all figuring this out together.”
Balance Your Budget With Safe Investments — and Factor in Social Security
Anyone with about $250,000 saved for retirement should create a well-thought-out budget that factors in their Social Security benefits. “In such a scenario, it’s crucial to manage your expenses carefully and consider ways to possibly generate additional income,” says Jeff Rose, CEO and founder of Alliance Wealth Management LLC in Carbondale, Illinois.
Simultaneously, make sure to review your investment strategy “to ensure it aligns with your retirement goals, potentially focusing on investments that offer steady, albeit conservative, growth to help extend the lifespan of your savings,” Rose advises.
[See: 19 Part-Time Retirement Jobs That Pay Well]
If you can’t hang on with your current company, it’s helpful to land a part-time job to add some cash to your retirement budget.
“Working part-time in retirement is both a realistic and viable strategy to supplement your savings,” Rose says. “In fact, it can also be a healthy choice to stay active and engage with others in your community.”
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How to Retire With $250K in Savings originally appeared on usnews.com
