What happens when your projected retirement expenses are larger than your projected retirement income?
There are several ways to overcome this issue.
- Cutting corners.If you’re only slightly short of funds, you may want to take a look at cutting a few corners. For example, if you purchase a cup of coffee every day at work for $1, that adds up to $365 a year. If you invested that $365 at 5 percent, it would grow to $465.84 by the end of five years and $1577 by the end of 30 years (Source: “Get the Facts on Saving and Investing” by the U.S. Securities and Exchange Commission). Simple changes in your lifestyle can really add up over time.
- Reassessing plan. If you are really short of funds in your budget, you may want to take a look at your expenses. Are they realistic? Are you planning on living in a mansion with 10 servants when you’re currently working two jobs and barely getting by?
- Increasing your income. If you don’t want to change your expenses, you may want to consider increasing your income by delaying retirement or working during retirement.
- Reduce high-interest debt. If you have high-interest debt that is draining your resources, you may want to pay that off before investing for retirement. It makes little sense to save for the future by placing money in an investment that may make 12 percent per year if you are struggling with credit debt, which is costing you 18 percent. For example, one possibility to consider is refinancing your home mortgage to take advantage of favorable mortgage rates or to pay off high-interest credit card debt.
The information provided in this page is not intended to be legal or tax advice. You should consult your attorney or tax advisor for information that relates to your specific circumstances.
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