Most Americans are behind in their preparedness for retirement. In fact, the biggest retirement problem most people have is they are not recognizing that indeed they have a problem. They are kicking that can down the road to make the hard choices at some future point.
Like all problems, ignoring it is usually the worst possible decision to make. Not opening that retirement statement will not change what is printed on that statement. The good news is there many ways to help catchup, but like all decisions made in a finite world some may be initially hard to make.
Here we share some less discussed options that are often hidden from the view of the typical investor who is facing a retirement shortfall.
Move to a Smaller Home Sooner
Most people downsize their home as they age. In the current environment where home prices in many areas of the country are high and interest rates are still low, moving to a smaller home may make sense. The savings can then be applied to your retirement fund. The flip side to that coin is where do you buy? To take full advantage of high prices, you may need to look in other areas of the country or even rent for a number of years until home prices come back. All this is made easier given work-from-home policies at many companies allow for people to consider other areas once not possible.
Sell Your Life Insurance Policy
An asset that many people literally forget they have is a life insurance policy that is no longer needed. Called a Life Settlement, if you have been paying for a life insurance policy but no longer need the protection, selling it can be the windfall you need to buttress that savings account. There are many considerations to review such as ensuring the beneficiary no longer needs the protection, tax consequences and other issues. It pays to work with a financial advisor that is experienced in this area to not only weigh the issues, but find the optimal buyer to get the highest possible price for your policy.
Don’t Sacrifice Your Retirement for Other Expenses
Forgoing retirement savings for other pressing expenses may seem like a good idea, some sometimes it’s the wrong decision. For example, there are parents that pay for their children’s college by not saving for retirement. While noble on the one hand, that decision could boomerang on your kids as you could be a burden to them later in life. A better decision could be community college for the first two years, have your child live at home (work part time and pay rent even better!), then transfer to a four-year school later. Your kid’s employment prospects will not likely change as no one will ever know where those first two years were spent. Cutting the cost of the first two years of college in half or even more can make a big difference when it comes time to retire.
Whatever tactic you take, be it traditional or not, make sure you work with your financial advisor to think through all the ramifications. There is always a solution to catching up for retirement, but you want an objective third-party to help.
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