Can I afford to retire at this exact moment? Here are 3 simple rules of thumb to figure out if you can make the move in 2024
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While the “Great Resignation” and “quiet quitting” might still be sweeping offices for younger Americans, older Americans may have a similar, if more permanent idea in mind these days. With summer approaching and vacation plans beginning to take shape, some may be asking themselves whether they really can retire this year.
According to an article from Empower's publication The Currency, an estimated record-high 4.1million Americans will turn 65 this year.
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But here’s the issue. While retirement is rising, so are prices. According to RetireGuide, the average annual retirement income for Americans 65 and up in 2023 was $83,085 when adjusted for inflation. Should you live for another 30 years, that means you’ll need $2,492,550.
While the average net worth for people over 65 is only around $1.6 million, Americans in their 60s spend about 18% more monthly on average than the general population, according to the Empower figures.
Before you panic, let’s look at three tips you can use to help guide your retirement decision.
The 4% rule
Many financial advisers recommend that retirees live by the rule of thumb of taking out 4% of your savings each year. This is the amount you can withdraw no matter what and hypothetically still have your retirement savings last another 30 years.
The main question here is whether this will offer you enough income, when combined with Social Security, pension and all the rest. If you have $500,000, that would only be $20,000 per year. Yet if you have $2 million, that would be $80,000.
That’s why, no matter what your 4% adds up to, you want to make sure you’re taking every measure to stretch it out. One retirement focused option would be putting money into an IRA account. Opting for a Gold IRA with the help of American Hartford Gold allows you to benefit from the tax advantages of an IRA along with the inflation-hedging properties of gold.
A gold IRA gives you the opportunity to diversify your portfolio by investing directly in precious metals. If you sign up for American Hartford Gold, you’re eligible to get up to $10,000 in complimentary silver and a free investor guide that can help you protect your nest egg while growing your wealth.
The rule of 55
This next rule of thumb deals with the tax implications of retiring early. While some potential retirees will have plenty of savings, it won’t be beneficial to retire early if you end up paying normal income tax. This is the case for those retiring after 55.
Usually, you’d face a 10% tax withdrawal penalty for making a withdrawal from a tax-qualified retirement plan like a 401(k). But for workers who have an employer-sponsored 401(k) plan, the IRS allows anyone over the age of 55 who decides to leave the workforce to start drawing penalty-free distributions from that plan.
It’s also not beneficial to retire early if you’re still paying off debts. To make sure you’re in the best possible position when that time comes, you’ll want to have settled as many of your outstanding debts as possible.
To expedite this process, you can use a free service called Credible to consolidate your debts into one monthly payment.
Rather than worry about multiple bills that each have their own minimum payments, deadlines and interest rates, you can take out a new loan with a lower interest rate and use it to pay off your other debts immediately.
You’ll then only have to make a single payment each month, and the lower rate will potentially save you a huge amount in interest — more money that you’ll be able to set aside for retirement.
Read more: Jeff Bezos and Oprah Winfrey invest in this asset to keep their wealth safe — you may want to do the same in 2024
You need $1 million (or more) in the bank
A recent survey by Northwestern Mutual found that Americans believe they need $1.25 million to retire comfortably today and continue receiving income for the next 20 years.
While $1.25 million isn’t realistic for everyone, it’s still a great idea to create a retirement goal based on the advice of your financial adviser and a budget. And one of the best ways to start working towards your goal is to build yourself a diversified investment portfolio that will earn steady returns over time.
If you’re worried about the unpredictability of stocks, there are a number of alternative asset classes you can invest in that have a low correlation to the stock market, like real estate, private assets and fine art.
If you want an accessible way to invest in the real estate market without buying and managing a property yourself, you can do so through Arrived. Backed by billionaires like Jeff Bezos, Arrived allows you to invest in fractional shares of rental properties and vacation homes without the hassle of being a landlord.
Getting started is simple: browse their selection of homes, each vetted for their potential appreciation and income generation. From there, you can choose the number of shares you’d like to purchase and start investing with as little as $100.
Aside from real estate, private assets have historically been thought of as a stock market alternative that were only available for those who already have millions — but that isn’t the case anymore.
If you’ve ever dreamed of owning iconic pieces of art look no further than Masterworks.
To the savvy buyer, art is an investment, a way to grow your money akin to stocks and bonds. Why? Because, like a fine wine, a piece of fine art gets better — and more valuable — with time.
Masterworks is an online platform that allows you to invest in shares of the work of renowned artists from Banksy and Basquiat. Simply choose the amount of shares you want to purchase, and Masterworks takes care of everything else.
Fundrise offers access to a range of alternative investments including real estate, private debt and venture capital to help you grow your portfolio.
With over 2 million investors and $7 billion in real estate alone, Fundrise offers an accessible entry point for individuals looking to diversify their portfolios outside of the stock market. With the potential to bring in dividends on a quarterly basis and returns that have consistently outperformed the S&P 500, Fundrise can help you invest for your retirement goals.
Get some guidance
It’s easy to get overwhelmed when it comes to retirement planning, but remember that you don’t have to make these big decisions on your own — consulting with a financial professional can provide important insight into the best steps to take next.
If you’re not sure how to go about finding the right person to talk to, you can use Advisor.com to get matched with a vetted financial adviser in just a few minutes.
Just answer some brief questions about yourself and your retirement goals, and Advisor.com will find you an adviser who can help navigate your unique financial situation and make the right moves.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
