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December 1, 2015
How does your income compare? Is there anything you can do to improve your financial prospects?
Retirees with average retirement income are barely better off than people living in poverty.
The Institute for Research on Poverty says that the Department of Health and Human Services Poverty Guidelines for 2013 ranks a single-person household as meeting the poverty level if income is $1,102.50 monthly or less. This guideline determines eligibility for certain social assistance programs, and it’s only about $300 less than the median retirement income.
Census bureau information gives a lower poverty threshold of $980 monthly for a single adult, which is well below median retirement income. This statistic denotes actual poverty, not just eligibility for assistance. That’s slightly better news for half of retirees, but it doesn’t help $1,500 stretch any further. And the other half of the median line might be in dire straits.
According to the Pension Rights Center, older adults get retirement income from the following sources:
As you can see, retirees today are more dependent than ever before on Social Security income. One of the biggest problems with that approach, aside from the fact that the program isn’t incredibly stable, is that Social Security was never intended to be a primary source of income. It was intended as a boost.
Whether or not your retirement income will afford you the life that you want partly depends on where you live. Some places are just a lot more expensive than other places.
You can get a quick and easy comparison by using the NewRetirement Retirement Calculator. In addition to being one of the most comprehensive and useful retirement calculators — really more like a virtual financial advisor — the tool can instantly tell you how your income, expenses, assets, debt and net worth compare to other people in your zip code.
Enter your information and the calculator shows you how you stack up.
Maybe comparing your plan to others doesn’t seem important right now, but it can reveal major shortcomings. If most of the people in your area are far ahead, you can investigate why and make adjustments to how you save now. Or it might show the opposite. Maybe you’re ahead of the game and can relax a bit in knowing that you’ve got a plan that works.
Most retirees collect Social Security and make up the difference for excess expenses by withdrawing funds from savings — if they are lucky enough to have savings.
A better idea is to have a specific spending and income plan for your retirement. Most of us are not very good at budgeting. And living month to month works okay when you are working, but having a clear budget and a solid plan is more important when you are retired.
By definition, your resources are more limited when you retire.
So maybe you’ve examined your financial plan and found that it needs a little improvement. There are ways to manage that at any stage of the game.
If you’re still very young, adjusting will be easier. Max out your 401(k) contributions or start an IRA, and keep up the contributions, and you’ll have a tidy sum when you retire.
If you’re midway through your working years, it’s a little tougher. Look for ways to cut back so that you can save more. And if you’re 50 or older, you get a boost. Catch-up contributions for 401(k) and IRA plans raise your max contributions by $6,000 annually in 2015, according to the IRS.
If you’re on retirement’s threshold or in retirement already, you can still improve your financial situation and get more retirement income.
Here are 6 of the best ways to get more retirement income:
1. Postpone retirement:
2. Postpone the start of Social Security:
3. Get a retirement job:
4. Postpone withdrawal of savings and maximize investments:
5. Tap your home equity:
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6. Budget and stick to it:
If you haven’t tried it yet, now is the best time. The NewRetirement retirement calculator isn’t a magic 8-ball (although it very well seems like one) but it can be your new best friend for creating a retirement income that’s a lot better than average.
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