News Flash! You have less income in retirement, AND bills you still need to pay! The 2008 market meltdown and housing crash was brutal for most Americans, even more so for retirees. Retirement plans were decimated and home values plummeted. By and large seniors were living on Social Security and qualified plan monies. Those qualified plan monies lost considerable value. It was the year that the 4% rule died. There was little to no equity left for most retirees after the housing crisis, so there was no money to borrow. But the bills still came in. And for most, the same bills - month after month. It was difficult for many seniors to pay their bills with fluctuating income. It should be financially antithetical to rely on fluctuating market income for guaranteed monthly obligations.
The introduction into wise retirement planning is to get a hold of your actual spending and create a budget based on essentials and known discretionary spending. The name of the retirement “pre-game” is to reduce your living expenses as much as possible before your retirement date.
One of the big mistakes of retiring baby boomers is maintaining a mortgage into their golden years. The “sandwich,” as the boomers are called, had great difficulty paying off their mortgage while paying their parent’s eldercare costs and children’s tuition. If you are carrying a mortgage into retirement, the first thing to do is to review the Home Equity Conversion Mortgage program under HUD and insured by the FHA and determine if you’re suitable for these mortgage payment elimination strategies. It could be the solution to significantly reduce your retirement expenses by eliminating your mortgage payment.
The second item to consider is maximizing your Social Security benefits. If you can delay taking your benefits until age 70, you will significantly increase your lifetime monthly income, possibly up to 132% over full retirement age.
The third item on the retirement bucket list is to purchase a guaranteed lifetime annuity to supplement Social Security income to match up to your essential and discretionary budgetary spending. Then you have guaranteed income to pay your guaranteed bills. Some financial planners call this posture the “Happy Factor” of retirement.