Employee Benefit Research Institute divides retirees into average, comfortable, struggling, ‘just getting by,’ and affluent in its new research.
Since this looked at retirees with less than $1 million in assets, it is most relevant to ordinary people because it allows you to understand – what things can maximize your success at living well in retirement.
In fact, the study turned out to be quite trivial in the sense that it confirmed many people’s life goals and ideas about what a successful retirement should look like. Still, it’s a great reason to think about how to make retirement as successful as possible, especially if you still have time to plan your life.
Minimize or get rid of consumer debt
The most common types of consumer debt are credit card debt and car loan debt. Successful retirees have no such debt or minimize it.
Not having consumer debt gives you more free money to spend, so you are freer to manage your money and plan your life.
If you still have time before retirement, getting rid of consumer debt may be the right path to a successful retirement, as it will not only increase the amount of free money you can spend (instead of spending it to service retirement debt), but it will also increase the amount of your savings.
Pay off your mortgage
The study confirmed what a lot of people believe – if you are a homeowner who has paid off a mortgage – you will have a more successful retirement.
Paying off your mortgage will reduce your expenses when you retire, and if you pay it off and have time before retirement, you can put the free income into retirement savings.
In addition, there is also an important psychological aspect – if you don’t have to pay your mortgage every month, you feel more stable and secure.
Save as much money as you can
There’s really no set amount you have to have before you retire. Nick Lanski for Splaitor calculated it as $120,000, but that’s the amount you should be able to spend on average $15,000 a year, which doesn’t sound like a successful retirement. And he only counted the 401(k), no other sources.
Liz Knueven for Insider writes that it’s an average of $642,000 for the 60+ category.
In general, you need to calculate your spending (for example you can use the 4% rule, it’s the most common one that says you will spend 4% of your savings each year) and multiply by 25 (the average number of years in retirement).
This will allow you to estimate how much you really need to live in retirement with expenses that are comfortable for your lifestyle.
Featured image: Yossi Meystel, Blogspot