Retirement Savings: Build During a Recession
Don’t let the event of a Recession discourage you from building retirement savings. It would be best if you worked on that retirement nest egg during career uncertainty and employment angst. Statistics show that many people get thwarted in their efforts to save for retirement by job dislocation, income interruptions, taking care of loved ones, or birthing and rearing children.
External events like recessions can also be ruinous. You may turn to easy forms of credit to pay bills and drive your debt up, which will cost you savings. Consider your budget. You may lose your job and stop contributing to your savings account. You may also grow discouraged by the miserable savings return in interest and give up on saving overall.
Put off Taking Social Security
Social security is the payment you get after paying into the system all your life. It’s forced retirement savings in effect, and you can determine when you want to take Social Security. In other words, you may not want to retire as early as age 62. You may have reasons already for delaying retirement, for you may like work and enjoy getting those paychecks regularly.
But there are other reasons to delay taking Social Security. One reason to wait is that your monthly check increases the later in life that you take Social Security. Although you can take Social Security at age 62, the entire Social Security check will kick in once you’re 66, and your monthly check increases yearly. You procrastinate about Social Security until 70 years when it stops rising. Check your annual statement and discover how much money you will get money when you retire at 62- 66- or 70 years old.
By moving your retirement date back, you can increase your monthly check amount, adding to the retirement package.
Or, Don’t Put it Off.
But hold on! Some people say the amount of your monthly check is not the issue. Instead, it’s the sum you get from Social Security before you die. In that case, taking the social security check at age 62 might make sense. It depends on how long you expect to live. If you don’t expect to live long into your 80s or 90s, taking the lesser amount at age 62 nets you a more significant total across your life.
I’ve seen some estimates that it will take your neighbor to age 78 years before they can catch up to the payments you’ve received because you took the lesser amount at age 62. For this argument, we’ll say your neighbor took the larger amount available but at age 66. If that’s true, then it’s also true that you will get more from Social Security if you take later payments and then live into your eighties or nineties. Weird, huh?
But one advantage of retiring at 62 years is to preserve your health. This is true, particularly if you don’t feel that work won’t cause your health to decline. If you’re confident it will cause a health decline, then retire at a time when you feel comfortable.
Work Later in Life
One of the benefits you get by taking Social Security later in life is to work longer into your twilight years, thereby increasing your retirement savings. Of course, that means you continue to make as much money, and you continue to invest in your coming retirement. Consider increasing the amount of money you’re already putting away.
You can also continue to earn more income after retirement. However, it would help if you were careful not to exceed the amount allowed by Social Security to continue getting your full benefit. Many firms appreciate older people working part-time for them because older workers are stable, thoughtful, and reliable. And some older workers don’t have a heartbeat if they’re not working. It’s a shame, but many of us are work-a-holics!
Work is a great place to socialize, and you’ll continue to enjoy that if you decide to work later. An active person is generally healthier than an inactive person, so if you don’t believe you can avoid becoming a couch potato in retirement, keep working. You’ll feel healthier. Finally, if you think you need to do more with your life, you’ll get more years to reach whatever goals you set for yourself. On top of that, you’ll also allay fears that you’ll fall out of the cycles of life and you will fail to experience new things in real-time. So working longer in life is okay.
Examine Your Investments
Check your investment portfolio to look for ways to increase your return on your current savings picture. Consider your age as you examine your investments. The younger you are, the more risks you can take that could increase your retirement funds.
If, for example, you are heavily invested in bonds, you may switch to real estate investments or invest in the stock market, which tends to pay more during recessions when an inflation bubble is causing an economic slowdown.
Accounts that Pay
Dividend stocks increase your funds by paying a quarterly/monthly check, so consider investing in dividend stocks. You may also shop around and discover a better savings account than your current one. Consider a savings account that pays out as much as 5% in interest on minimum balances, but be sure there are no fees. In other words, go after a high APY and a no-fee account and put your savings in that. While you should stay away from bonds during a recession, you can invest in I-bonds, or Inflation bonds, if an inflation bubble causes the recession.
If you’re young, there are riskier investment moves, but because it’s your retirement, avoid buying high-risk options such as Options and stocks in highly indebted companies. No matter their debt type, they pass on investments there.
Check Your Annuity Picture
Pension plans, blind trust, or annuity it’s all the same. People get a small monthly payment from an insurance policy that pays them after they retire. To increase your retirement funds, take the annuity payment early. That way, you have more lump-sum money to invest in something that gives you a higher yield.
Check out my newsletter below:
