1 in 4 workers make an alarming assumption about their retirement income | Smart Change: Personal Finances
Most workers plan to rely on various sources of income in retirement. Some of them, like 401(k), IRAs, and Social Security, are fairly common and well-known, but as concerns about retirement funding continue to grow, we’re seeing people looking for ways less orthodox to cover their bills.
Some of these strategies are sound, but there is an alarming trend that is only growing over time.
Who receives the invoice?
While most workers plan to rely on retirement savings, social security, a pension or even a job, nearly one in four workers expect support from family members to be a source of retirement income, according to a recent Anytime Estimate survey. This attitude is more common among younger generations. Only 14% of baby boomers say they plan to rely on family for support, compared to 23% of millennials and 29% of Gen Z.
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It would be nice if we could count on the help of others in retirement, but it is dangerous to build this assumption into your retirement plan. There is no guarantee that a member of your family will have the money or the desire to support you financially in retirement. Even if they try to help you, they may not be able to provide you with the financial support you need.
Plus, expecting others to support you in retirement can put a huge financial burden on them. They will have to divert their limited financial resources from personal goals and retirement savings to help pay your bills. This can create a vicious circle in which each generation becomes dependent on the next for retirement assistance.
A proactive savings approach is best
Consider support from family or friends as a last resort. Do your best to prioritize your personal savings now. If you have access to a workplace retirement plan, you can have money automatically deducted from every paycheck so you don’t have to remember to make the contributions yourself. You can also open an IRA and invest money in it.
If you’re worried that’s not enough, consider other options like working part-time in retirement or postponing your retirement date. It can help ease the strain on your personal savings without making you dependent on someone else.
Those who find themselves without enough money in retirement should research government assistance programs before asking friends or family for help. The federal government provides monthly Supplemental Security Income (SSI) checks to blind, disabled, and low-income seniors. Your state or local government may also offer programs to help cover your basic living expenses.
Homeowners could also consider tapping into some of their home’s equity through a reverse mortgage. This is only available to homeowners aged 62 or older with substantial equity in their home. It basically allows you to borrow against the equity in your home without making any loan repayments during your lifetime. But when you die or leave your home for good, the loan balance comes due.
Having multiple sources of retirement income is a smart move, but you want those sources to be under your control as much as possible. Expecting support from other people is dangerous and could give you a false sense of security about how much you need to save on your own. Instead, take the time to review your retirement plan and find other strategies to make ends meet.
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