All In A Days Work

Work, work, work. You’ve probably been doing it for longer than you can remember.  But what about the light at the end of the tunnel – retirement?  With an increasing number of Americans reaching retirement age, the need to have a plan to pay for life after work become even more important.  So, with that in mind here are six ways to pay for your retirement.

• Social Security

For better or worse Social Security has become the default option for paying for retirement.  However, it was never meant to be this way and according to some sources Social Security will run out of money by 2034 – if not sooner.  That being said, Social Security plays an important role in paying for retirement and you should take advantage of this option for as long as it is around.

• Pension

Remember those?  While the pension has been under assault for the last 30-years nearly one-third of employees in large firms access to one.   This is good news as pensions provide steady income over your retirement.  However, it also means that most Americans will need another option to enjoy their requirement.

As such, the days of banking on a pension are over and with more and more employers shifting to 401(k) plans, you will need to make sure that whatever funds you have in a pension or equivalent, are safe and secure.

• Reverse Mortgages

While it’s hard to escape the ads on TV these day, the reality is that reverse mortgages have become an increasingly popular way to pay for retirement.  The reason for this is two-fold.  First, homes tend to be the most valuable asset most people own.  Second, many baby boomers lack access to the cash they need for retirement.
This is why reverse mortgages have become a viable option for millions of Americans over the age of 62.  The benefit of using a reverse mortgage is that you can access the equity in your home without needing to make month payments.  Find out if you are eligible by checking out this short review of the advantages and disadvantages of a reverse mortgage.

When you apply for a reverse mortgage you are asking your lender to loan you your own home equity in the form of cash. Home loans of that type are available from reverse-mortgage lenders if you are at least 62 years of age. The purpose of borrowing money in such a way, rather than taking out a traditional loan, is to avoid the need to make monthly payments. Each reverse loan is structured so that repayment will not be necessary until the property is vacated by the loan applicant. In other words, if you move or die, the loan will become due. At that time your lender will require your family to pay the balance, if they wish to keep your home. Otherwise, the home will be sold.

• Investments

If you are fortunate enough to have enough money left over each month to invest then this might be a great option to help pay for retirement.  While you might think that investing is difficult and time-consuming, Warren Buffet, one of the richest men in the world had proven that you don’t need to be a fund manager to make a killing in the stock market.

Back in 2008, Mr. Buffett challenge fund managers that he could outperform their investment strategies by picking an exchange traded fund (ETF) and sticking with it over the long-term.  As part of this bet, Mr. Buffet chose an S&P 500 Index Fund which returned more than 80% over the 10-year period.  Keep in mind, this including the Great Recession which essentially wiped out a lot of start market gains, and jobs and home values, in the last decade.

His result beat the picks of Ted Seides, a fund manager, who took the bet and chose five ‘funds of funds’ as his picks.  As such, there is a case to be made for a conservative investment strategy which can achieve sizable returns over time.

• Savings Accounts

Granted the interest rates for savings account and Certificates of Deposit (CDs) are not great right now, but it is a better option than keeping your money in your mattress.  The benefit of keeping a portion of your money in a saving account is that that it is relatively accessible.  This means you will have enough money on hand to pay for expenses as they occur.  As such a good rule of thumb is to have enough to cover between three to six months of expenses on hand at any time.

• Annuities

This is a fancy way to say fixed income.  The way annuities work is that you invest a chunk of money, usually to an insurance company, and then they will pay you back dividends over time.  The advantage of annuities is that they offer steady returns.  The downside is that it can be difficult to withdraw your initial investment before the annuity has matured.  Millions of retirees have chosen annuities to pay for retirement.

There you have it, six ways to pay for your retirement.  While there are other options these are some of the most popular.  Remember, you’ve worked for longer than you can remember so plan wisely to enjoy your golden years.