Retirement Readiness: A New Perspective
As a 60-year-old with only $15,000 saved, it’s natural to feel concerned about your retirement prospects. However, instead of focusing on the amount you’ve saved, let’s assess your overall retirement readiness.
Understanding Your Income Needs
First, determine how much income you’ll need in retirement. You may be surprised to find that you require less than you think. Since you’ll receive an 80% pension from the state of Massachusetts, you’ll already have a substantial portion of your income covered. Plus, as a Massachusetts resident, you won’t have to pay state income tax on your pension, which means you’ll save 5% of your income right off the bat.
Closing the Gap
While saving more is a good idea, it’s essential to consider other ways to bridge the gap. For instance, you could:
- Reduce Expenses: Look for ways to permanently cut costs that you can live with. Downsizing your home or moving to a lower-cost area could put more money back in your budget.
- Work Longer: Every year you work means one more year of income and one less year of drawing from your savings. You might also increase your pension income by working longer.
- Supplemental Income: Consider retiring from your current job and finding a part-time job that pays more than 20% of your current salary. This could increase your total income.
Maximizing Your Pension
Since your pension is based on your highest consecutive three or five years of income, working longer could increase your pension income. Additionally, if you’re eligible for Social Security, don’t forget to factor that in.
Seeking Professional Guidance
A financial advisor can help you create a personalized plan to achieve your retirement goals. They can assist you in assessing your income needs, maximizing your pension, and finding ways to supplement your income.
Taking Control of Your Retirement
Remember, it’s not just about saving more; it’s about creating a comprehensive retirement plan. By focusing on reducing expenses, maximizing your pension, and finding supplemental income, you can set yourself up for a more secure retirement.
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