Savings Tips for Workers Who Are Close to Retirement. By: Marvin Dutton

Public Sector Retirement Education - PRSE - Savings Tips for Workers Who Are Close to Retirement

Millions of workers born between 1946 and 1964, the baby boomers, are close to or have already retired. However, not many of these people are completely prepared for retirement. Many of the workers in this category do not have enough savings to support themselves. Yet, increased lifespan expectations and rising healthcare costs have increased the post-retirement expenses of all workers. 

According to the Federal Reserve’s Survey of Consumer Finances, the median retirement savings for all Americans was only about $65,000 in 2019. The same survey found a mean savings of $269,600 for families between 35 to 64 who had IRA or DC savings plans. 


Cut Back on Expenses


Our first financial advisor, Katie Coleman, explained that the first action is always to cut back on expenses. Coleman is a financial advisor at Ameriprise Financial in New York. She explained that when working with clients with similar issues, she always starts with their expenses. She added that most people in this category spend a lot of money on fixing their homes. When this happens, Coleman said workers have two options. They can either decide to look for ways to reduce the repair costs or move to a smaller apartment in a less expensive neighborhood. 

Coleman said this is not often a challenge as most people prefer to move closer to their families when they are retired or close to retirement. She explained that she also examines the possibility of asset allocation. However, this approach has many variables, including the planning horizon and how comfortable clients are with risk-taking. Coleman explained that the aim is always to seek a balance that would keep clients assured and happy. 

Lastly, the financial advisor explained that she examines her clients’ expenses and expectations for their investments portfolio. She then draws up an adequate plan for asset allocation to help them meet their expectations. 


Saleable Assets and Life Insurance


Nathan Snyder of Janney Montgomery Scott in Pittsburgh has a different approach. The financial advisor said his first approach is always to examine clients’ saleable assets. These assets include real estate properties and other assets that can create liquidity. Snyder also said clients could save more by spending less on their adult kids. The financial advisor said most pre-retirees continue funding the lifestyle choices of their adult kids even after such kids get a college degree. 

The financial advisor added that such parents think they are helping their kids but are only helping them live above their means. He added that pre-retirees should learn to place their retirement savings above other expenses. As soon as they save enough, they can give whatever is left to their kids. 

Snyder also talked about the possibilities of turning life insurance plans into savings. The financial advisor said this could happen in two ways. He explained that whole life insurance policies could be redeployed and turned into cash value assets. Other types of insurance policies can also be redeployed, according to Snyder. He explained that pre-retirees could cancel such insurance policies and use the premiums for something else. 


Emergency Funds


Our third financial advisor, Rick Friedman of RBC Wealth Management, Houston, said his first approach is to draw up a financial plan for clients. These plans include examining clients’ 401(k) balances. The financial advisor said that, at the very least, employers should be matching workers’ contributions to the retirement savings accounts. Friedman added that the next stage is to map a plan that allows a client to work towards having an emergency egg nest in the bank. He added that the egg nest is of utmost importance and should come immediately after 401(k) savings. 


Downsizing and Monetizing Assets


The fourth financial advisor on our list is RegentAtlantic’s Jim Ciprich. Ciprich is a wealth advisor at the New Jersey-based organization. He explained that while most retirees have budgets, those in more drastic situations need more drastic cutbacks to help them survive retirement. These cutbacks could include moving from an expensive neighborhood to a less expensive one. Retirees in such situations may need to accept that they may not be able to afford a luxury lifestyle after retirement. 

Friedman also explained that retirees could monetize their assets to save more money. A way to do this is to rent out parts of their properties. He also stated that pre-retirees could consider deferring their retirement to a later date to save more money. 


Cut Down on Spending or Sell Assets


Read Hubbard, a senior financial advisor at Merrill Lynch, Connecticut, has a similar approach to other financial advisors on the list. Hubbard said clients could save more by cutting down on their expenses or selling some of their assets. They can downsize to a smaller property, consume less and sell off extra homes and cars. These steps, the financial advisor explained, will avail workers with more spending funds during retirement. 

Hubbard said his team also examines their clients’ monthly budgets, brokerage, and retirement savings accounts. He said these searches almost always turn up solutions to the problems.

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