6. Start to move investments into fixed income
The average annual return for the S&P 500 from 1957 through 2018 was about 10%. Equities have been a good place to park retirement money. And as bond yields have dropped to near all-time lows, they have become very unattractive. All of that may have changed because of the economic fallout of the coronavirus.
In the last recession, stocks fell almost 50%, wiping out retirement savings for many. Investment bonds do not offer big returns, but they are safe. People have complained for years that owning U.S. bonds was the top way to undermine retirement nesteggs. Now, they may be able to protect rather than hinder investments in retirement savings accounts.
7. Take out a reverse mortgage
Reverse mortgages often get a bad rap, but there are circumstances where they can be a reasonable strategy. If your home is your largest asset and you need cash and have no other way to get it, this may be your best option. To get a reverse mortgage, your mortgage must be paid off (or nearly so).
Weigh the amount a cash sale would net against the amount you could get from a reverse mortgage, including all fees. An additional consideration is that taking a reverse mortgage means you do not have to move and are already familiar with the ongoing costs (heat, maintenance, etc.)
8. Plan to move to a less expensive home
More than a third of American homeowners’ wealth is tied up in their homes. If you have fully paid off your mortgage, or nearly so, you might want to consider selling your home and purchasing something smaller. By downsizing, you might be able to pay cash for the smaller home and use the rest of the proceeds from the sale of your old house to pay off any remaining debt. Being debt free headed into retirement is (or should be) a top goal of any retirement plan. Of course, making a move will have to wait until regional stay-at-home orders have been lifted.
9. Move to states that are less expensive
Cost of living varies widely from state to state — and there are several states that are popular with American seniors. In a very rough economy, a lower cost of living can help you make a dollar go farther. If the average cost of living in the U.S. is indexed to 100, the state with the lowest cost of living is Mississippi with an index of 86.1. Other countries with good lifestyles and low costs of living include Ecuador and Panama.
10. Plan on living to 90
According to the Social Security Administration, if you were a 62-year-old male in 2016, your life expectancy is just over 20 years, to 82. A 62-year-old woman can expect to live until she is 85. For the purposes of retirement income, it might be wise to determine how much you and your partner will need assuming you live to be 90. Can your retirement savings be stretched to age 90, and how would it change your expected retirement income? Do not forget to add inflation, both to your Social Security benefits and the cost of living.
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