Saving enough to retire comfortably can be incredibly challenging. About 65% of Americans have less than $ 100,000 saved for retirement, according to a report by the Employee Benefit Research Institute. Of that group, more than a quarter have less than $ 1,000 in stock.
If your retirement savings are insufficient, it can be difficult to get them back. But how much do you really need to retire? If you reach retirement age with $ 100,000 in the bank, how far will that money go?
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Stretching Every Dollar Into Retirement
Each person’s financial needs will be different, so how much US $ 100,000 will depend a lot on their lifestyle. Some retirees can spend so much in one year, while others can make it last longer.
A general rule to consider when planning for retirement is the 4% rule. According to this guideline, you can withdraw 4% of your total savings during the first year of retirement and then adjust each withdrawal thereafter to compensate for inflation. Following this rule, your economy should last for about 30 years.
The 4% rule is not perfect, but it is a good reference to get an idea of how much of your savings you can draw each year. According to the 4% rule, if you retire with $ 100,000 in savings, you can withdraw about $ 4,000 a year on retirement.
It is almost impossible for anyone to survive on $ 4,000 a year, but most retirees will also be entitled to Social Security benefits. The average beneficiary receives about $ 1,543 a month, or about $ 18,500 a year, according to the Social Security Administration.
Unless you have access to a pension or other source of retirement income, you may need to survive on your savings and Social Security only. In this case, this amounts to about $ 22,500 a year in retirement income.
What if that is not enough?
While some retirees may be able to pay their bills at $ 22,500 a year, many people will need much more to live in comfort. Fortunately, there are some things you can do to increase your retirement income.
One option is to postpone the application for Social Security benefits. The longer you wait to claim (up to 70 years), the more you will receive each month. You can increase your benefits by up to 32% by waiting until you are 70 to claim, which can add up to hundreds of dollars more per month.
If you still have some time before you retire, you can choose a second job and apply that money to your savings. You can also consider moving to a more affordable city or downsizing to a smaller home to save money. It can still be a challenge to live on $ 22,500 a year, no matter where you live, but cutting your expenses to the maximum can help your money go further.
Finally, you can choose to invest in dividend stocks to increase your retirement income. Dividend stocks are investments that pay a percentage of the share price to shareholders each year or quarter. For example, if a share costs $ 100 per share and pays a dividend of 5% per year, you will receive $ 5 per year in dividend payments. That doesn’t seem like much, but if you own hundreds of shares, those payments can increase.
Of course, it is still important to invest wisely and not throw all of your money into one or two individual stocks. But when dividend stocks are part of a well-diversified portfolio, they can help increase your retirement income.
It is not easy to prepare for retirement, especially if you are losing your savings. But no matter where you are financially, there are steps you can take to enjoy a more comfortable retirement.