How to improve your retirement income

Few steps that can improve monthly income in retirement

Working Americans households probably will experience a potential income drop of 28% in retirement, about 38% retiree households may not have enough income to cover monthly expenses according to new research from Fidelity that shows retirement income gaps could force significant sacrifices for some wpeople retiring now and in 50 years.

The Retirement Savings Assessment, the first industry analysis that provides actionable and quantifiable steps across three generations that quantifies the potential benefits of five steps — such as adjusting asset allocation and annuitizing retirement assets.
“While there is evidence that Americans are saving more for retirement, our analysis finds that they need to take additional steps to prepare for the future and take better control of their personal economy,” says Kathleen A. Murphy, president of personal investing, Fidelity Investments. “The study underscores the importance of early engagement in the retirement planning process and the potential impact these steps can have in helping address the retirement income gap that many Americans are facing today.”

1. Adjusting asset allocation. 21% of those surveyed are invested too conservatively with limited exposure to stocks, based on current age and planned retirement date. This shows many investors have improperly allocated their assets and are passing on long-term earnings potential of stocks.’Put your money where the returns are - Educate yourself about investing and consider paying a professional to help you choose the right place for your money. Financial experts say too many people keep too much money in the wrong kinds of accounts, for example checking accounts, savings accounts and money market funds, which typically have low interest or return rates.
Adding $200 a month, or $2,400 a year over 10 years to a starting retirement savings balance of $40,000 would more than double your money, assuming a 5 percent rate of return and all earnings reinvested.

2. Increasing savings. This shoud be a no-brainer, but respondents said they saved an average of $3,500 in 2011, with most still not fully taking advantage of the tax-advantaged/deferred savings potential of their workplace or IRA accounts. This should be more important for younger people, who have a longer time and more potential for their money to grow.
Without exception, retirement planners advise contributing the maximum to your retirement plan, especially if your employer contributes too. If your contributions are made by salary deduction, saving is easier to do and may seem almost painless. And contributing more means postponing, or "deferring," taxes until you withdraw the money at retirement.
Catch-up provisions for some retirement plans allow you to contribute extra amounts if you're over 50. Information about 401(k) catch-up contributions is available from your retirement plan administrator or on the Internet. If your plan has a catch-up provision, act on it now.

3. Adjusting retirement date. The average planned retirement age is 65, however delaying retirement by a few years or continuing to work part-time can assist in preserving assets so they can better chance of last through retirement. This can be especially powerful for boomers, many of whom Fidelity found are facing potential drop in retirement income. Recent studies have shown this could be already happening.
You don't have to stay at your same job if there are other opportunities. Maybe you want a new career, one that ties in to your personal interests. Longer life spans and better health mean many older people have the energy and enthusiasm employers are looking for, not to mention the skills and experience. Many people find the social benefits of working as important as the financial ones.

4. Cut expenses, big and little - Moving to a region with lower housing and living costs or moving to a smaller home can help narrow the savings gap. Another option is staying in your community but downsizing to a smaller place like a condo or apartment. The same factors that drove up the value of your current house, however, will also have driven up overall housing costs, including real estate taxes. Housing is a major part of everyone's budget so think carefully about where you want to be and whether you can afford it. Keep in mind, however, that moving includes its own financial expenses and means leaving friends and your community.
Financial planners say that pre-retirement years are the wrong time to take on large debts, including home equity loans and credit card debt, with its high interest rates. Buying a new car, boat, or vacation home is not wise if you need to save. Investing that $400 a month (the average 5-year car loan payment) and getting a 5 percent return would put more than $27,000 in your retirement account. Consider keeping your old car or buying a used one.
Pre-retirement is also the wrong time to give or "loan" large sums of money to your children and grandchildren. Their earning power is usually far better than yours. Now is the time to take care of your finances so you don't have to ask others to bear the financial burden for your care later on.

Saving: A Little Goes A Long Way
Extras To Do Without     Monthly Cost    Savings Over 10 Years @ 5% Rate of Return W\Earnings Reinvested
Weekly dinner for 2 @ $50          = $200      =$31,186
Premium cable TV                             $80      =$12,474
Movie & popcorn for 2 @ $32
twice a month                                 =$64         =$9,998
Daily lottery ticket                           =$30         =$4,678
5. Annuitizing retirement assets. Less than 20% of retirees are using annuities to create a guaranteed lifetime income stream to cover essential expenses. This can be an important tool to help ensure savings last through retirement – especially for those living beyond their mid-eighties.

6. Tapping into home equity. 72% of respondents own a home and one-third of homeowners have no mortgage. Through downsizing and expense reduction, this home equity could be used to generate income in retirement.

7.Tracking Down Help For Retirement. Like a black and white TV, retirement used to have high contrast and few choices: One day you were working and the next day you weren't. One day you lived on a paycheck and the next day on pension and Social Security checks. Your income was fixed and retirement was no mystery.
You have the power to put some color, maybe even gold, in your retirement. It mostly means putting into action a plan to close the income-expense gap and manage your money smartly now and during your later years.
You won't be alone. In the next 25 years, one in five Americans will be over 65. That's a lot of people today who need to work on a clear and realistic retirement plan during the next 10 to 15 years. Make sure you're one of them so your retirement wishes come true.
In the following list, you will find ways to discover more clues about retiring gradually and maybe working longer, paying attention to your assets and income, saving and investing, planning for increased expenses, including medical costs, and developing a withdrawal strategy. The information available on the Web sites listed is rich in detail and wide in scope. But remember to protect your privacy by not giving out personal information such as your Social Security number, telephone, or address, unless you know whom you're dealing with.
In fact, helping American workers succeed in a new kind of retirement has become the focus for a number of government agencies and organizations. Businesses selling products and services like annuities, long-term care insurance, and income management services are another source of information.

These are just a few ideas.

None of this is a recommendation to sell or buy any specific product. Always consult an advisor before making any changes or purchases of any financial products.

A Few Words About Scams

Recognize that anyone can claim to be a "financial consultant” or "investment counselor.” That person may not have the special training, expertise, or credentials necessary to back up the claim, however. Ask about licensing and professional designations and check them out with securities regulators and any trade groups in which they claim membership.
Understand your investments and never be afraid to ask questions. Good financial professionals are never pushy, and they never dismiss your concerns.
Don't let embarrassment or fear keep you from reporting suspected investment fraud or abuse. Contact the securities agency in your state as soon as you suspect a problem or believe you have been dealt with unfairly.
Never judge a person's integrity by how they sound or how they appear. The most successful con artists sound extremely professional and have the ability to make even the flimsiest investment seem as safe as putting money in the bank.
Monitor your investments. Ask tough questions and insist on speedy and satisfactory answers. Make sure you get regular written and oral reports. Look for signs of excessive or unauthorized trading of your funds when you receive statements, and do not be swayed by assurances that this kind of practice is routine.
Above all, become an informed investor. In investing, as in life, if it sounds too good to be true it probably is.
Now that you have reviewed the rewards and pitfalls of investing, you are ready for a review of all the clues you've tracked to solve the mystery of your retirement. Reading it will reinforce what you've learned and will help you to take action. You'll also find several resources to turn to for more information. Take advantage of them.