As baby boomers near retirement age and the economy continues to struggle it becomes more imperative that you have a savings plan beyond Social Security to carry you through your golden years.
The five years before retiring and the five years after are critical transition periods for investing and financial planning. If you are one of the 41 million boomers who will soon be facing retirement, here are some strategies to consider to make the most of your savings:
- Seek professional advice. When you're in your 20s and just beginning to grow your investment portfolio, it's wise to meet with a financial planner to help you set the wisest course. The same is true as you change your focus from accumulating money to safeguarding it through retirement.
- Set a realistic budget. Many financial advisors suggest that you should limit your withdrawals from your retirement savings to a mere four percent during the first year. So if you have $500,000, you can safely withdraw $20,000 during the first year of your retirement.
- Practice makes perfect. To adjust to living on your post-retirement budget, try it out for a year or two while you are still working. If you can live on your projected retirement cash flow without increasing your debt, then you know you can make it in retirement. This also gives you an opportunity to make any necessary adjustments before your income is reduced.
- Delay claiming Social Security. While you can claim Social Security at age 62, it will be a reduced benefit. Instead, aim for the break-even point, which is the date at which the sum of your reduced early benefits no longer exceeds what you would have drawn with delayed benefits. There are many Web-based calculators that can help you determine your break-even age.