Baby boomers are already retired or about to retire. Their economic prospects when they started saving for retirement were quite good, with sustained economic growth, low inflation and stable, long-term job opportunities. A lower cost of living, housing, education and health, as well as more inflation-adjusted wages, offered them enviable stability.
Unemployment rates were low, and they had a savings culture that was lost over time in the following generations. But how ready are the new generations — Generation X, millennials and centennials — to retire? There are many economic factors that have impacted these three generations, among which the financial crises of 2008 and COVID-19 stand out, as well as stagnant wages and low growth in a complicated global context.
On the Way For Retirement
In the United States, many of these young people on their way to the actual adulthood have high student debt. On the other hand, it has been difficult for them to save or at least acquire the culture of perseverance in saving due to the gig economy, that is, to work independently doing freelances or gigs instead of having traditional full-time jobs.
In addition, they look with concern at how the raising of the retirement age is being discussed all over the world, increasing the threshold from which they will start enjoying their benefits. What is the point of starting to save now thinking that you are going to retire, for example, at the age of 62, if when you reach that age you are going to find that your country increased the retirement age by a few years so that the system does not break? That discourages many and is totally understandable.
Learning to Live With What Your Retirement Will Be Like: The Trick of Downsizing
It is inevitable that retirement is a transcendental and paradigmatic change in your way of life, in your living costs and in your needs. An interesting trick if you are already approaching retirement age is to adapt to the lifestyle by thinking about how much money you are going to receive from benefits when you finally stop working. Calculate your estimated pension by researching with your retirement plan provider or with Social Security to get mental about how much money you are going to have for your expenses.
Start by thinking about which expenses you can reduce, first considering those superfluous or expendable expenses. Apply the trick of downsizing, which means moving from the house that is now too big for you to a smaller one. There are two ways to take advantage of this solution: some people consider selling their house to buy a smaller one and save the savings or invest them, or the big house can be rented to third parties and use the money to rent a smaller one. If you do it right, you will have some money left over every month.
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Many also consider moving to smaller places where distances are shorter, and we have already done some articles about it. This makes it easier to use public transport, walk, bike or share the car with someone else. This way you will save all the expenses associated with having a vehicle, such as gasoline, insurance, repairs, taxes, etc.
Don’t Apply for Social Security Benefits Too Early and Boost Your Payments
Remember that Social Security allows you to receive your retirement from the age of 62. However, experts recommend not to rush, because if you start cashing your checks from that age, you will receive a check that can be up to 76% less than if you wait until age 70, according to the AARP.
Even if you wait until the age of 67, which is the retirement threshold for those born in 1960 or later, you will notice an improvement in your social security income. If you wait to retire after your full retirement age, your benefits will increase by up to 8% each additional year, up to a maximum of 122% at age 70.
Let’s take an example: Let’s assume that your full retirement benefit at age 67 will be $1000 per month. If you retire at 62, you will receive $720 per month, but if you wait until age 70, your benefit will increase to $1122. The disadvantage of waiting until the age of 70 is that you will have to work a few more years, but you will have time to save more, and your investments will grow.
Because come on, guys, we all know that we are becoming increasingly long-lived generations, and we are going to have to bear the costs of more and more years of old age.