If you're approaching retirement age, it may be that you've been planning for this milestone for decades. And you deserve to enjoy every year of retirement to the fullest. But if these signs apply to you, your retirement might end up being one prolonged financial nightmare.
1. You have a minimal amount saved
Northwestern Mutual reports that the average person in their 60s has $112,500 saved for retirement. If your balance is similar, you may be headed into a tough situation.
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Remember, your nest egg needs to last for what could be several decades, so you can really only withdraw a small percentage of your savings balance each year. If you stick with a 4% withdrawal rate, a balance of $112,500 gives you just $4,500 a year to work with. And while that may be in addition to Social Security, it's still not a lot of funds.
If you don't have a lot of money as retirement nears, consider delaying your workforce exit so you can boost your nest egg. Working and contributing to your IRA or 401(k) plan for even another 12 months could improve your prospects.
2. You're planning to claim Social Security as early as possible
Social Security benefits become available to seniors starting at age 62. And many older Americans rush to file for Social Security at that age so they can get their money as soon as possible. But if that's your plan, it may not bode well for your retirement -- especially if you're not exactly rolling in savings.
If you're looking at a full retirement age of 67 for Social Security purposes, it means that a claim at age 62 will slash your monthly benefit by 30%. That, in turn, is apt to leave you with a lot less income to rely on.
If you can't wait until full retirement age to sign up for Social Security, at least compromise by not taking benefits as early as possible. You might, for example, push yourself to wait until age 64 or 65 instead of signing up at 62 to reduce the hit to your benefits.
3. You're not at all open to working in any capacity
If you worked hard all of your life, then you may be looking forward to a period when you don't have to punch a clock or report to a manager. But if you're absolutely against the idea of working in retirement, you may be setting yourself up for not just a financial hardship, but a period that's laden with boredom.
It's hard to go from working at full capacity to not working at all. And if you refuse to even entertain the idea of a part-time job, you may find that it's a struggle to fill up your days -- especially if money is tight and you don't have that much leeway to pay for entertainment.
Rather than remain firm on your anti-work stance, consider joining the gig economy as a retiree. That way, you can maintain more control over your schedule and enjoy more flexibility. But you'll also have an opportunity to generate some income and keep yourself busy without having to go out and spend money.
Retirement is a period of life you deserve to make the most of. But if it's plagued with financial worries, that's unlikely to happen. So if these signs apply to you, it may be time to change your strategy and mindset.
