2020 saw a complete upheaval of our economy. The result is that millions of people had to leave their jobs and struggled to pay their bills. And while there are some signs that things are improving, there isn’t much preventing something like this from happening again. Therefore, if you’re getting closer to retirement age, you’re probably a little worried. If this is you, here are some of the best ways you can fund your retirement in 2021 and beyond.
Perhaps the best way to fund your retirement is through your own savings. If you have enough time before you retire, you can start to save up money now then live off of mostly savings in your retirement. With enough pre-planning, you can have a healthy sum saved up when the time comes.
To save for your retirement, you have a few options. The most important thing to know is that you should open a retirement account rather than just another savings account. The reason for this is different tax benefits. Below are some of the different types of retirement accounts to consider:
Individual Retirement Arrangements (IRAs) – With an IRA, you can save money and possibly lower your tax bill in the process. There is a limit as to how much you can save if you are over the age of 50 but there is no income limit on an IRA. This option is typically best for people who want to make tax deductions but earn too much for a Roth IRA. To learn more about IRAs, you can visit this guide.
Roth IRA – A Roth IRA is another type of IRA, one that provides some different benefits. With this type of IRA, you can’t deduct the contributions on your taxes, but your money grows tax-free and you can withdraw the money in the future without paying taxes on it.
401(k) – The other type of common retirement savings plan is a 401(k). This is an employer-sponsored plan, where a portion of your salary is automatically deducted from your paycheck and entered into the savings account. Many companies offer a contribution match, which in effect doubles your contributions. You can learn more about using a 401(k) here.
Another possible way to fund your retirement is by finding some part-time work. Many retirees choose to take on another job after they retire, either for financial reasons or to keep themselves busy. If you’re nearing retirement, now is a good time to think about whether you want to continue to work, and if so, what type of job you may want to do. Thinking about this early can help you prepare so that you can quickly find another job once you retire. For some suggestions, here are the 10 best jobs for retirees.
Take Out a Reverse Mortgage
If you’re a homeowner, you may be able to use a reverse mortgage to fund your retirement. A reverse mortgage is when you take out a loan using the equity built up in your home. How much you are able to borrow will depend on several factors, such as the worth of your home and interest rates. According to Michael Branson, the CEO of All Reverse Mortgage, “Since interest rates are a primary factor in determining how much money you can receive, borrowers with the lowest rates will typically receive more proceeds and overall benefits of their reverse mortgage.”
Downsize to Cut Costs
Lastly, if you can’t bring in enough money to fund your retirement, you should consider downsizing. For example, if your kids are all out of the home, maybe you can sell it and move into something smaller. Or perhaps you only need one car now that both you and your spouse are not commuting to work each day. If you can shrink your monthly expenses, this will have the same effect as bringing in more money. Of course, your retirement is supposed to be a time of relaxation and fun, so try not to downsize to the point where you are no longer comfortable.
Fund Your Retirement the Right Way
There is no telling what the future holds. The best thing you can do is prepare as well as you can as soon as possible. This is especially true for your retirement, as you’ll likely need to live on a different income. Explore all the options available to you when it comes to funding your retirement, then make a plan that you think will work for your situation. You can always adjust as the world around you changes, but having a plan in place will help you to face these changes head-on.