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AARP AARP States Virginia Finances 50+

Retirement Planning: It’s Never Too Late to Start

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Breaking down retirement planning into two key steps will help you determine how to make money last a lifetime, according to Pamela Sams, a professional financial planner who is also a volunteer community ambassador for AARP Virginia.

“First, determine how much money you will need in retirement and compare it to how much you’ve saved. Then choose strategies to bridge the gap,” Sams explained during “Retirement Planning: Strategies for Today and Tomorrow,” a free online seminar offered by AARP Virginia on August 17.

As a general rule, people will need 85 percent of their current annual earnings in retirement to maintain their lifestyle, she said. Those who plan to splurge on travel or expect high medical costs should figure on tapping 95 percent of earnings during their retired years.

The easy-to-use online AARP Retirement Calculator can provide a personalized snapshot of what your financial future may look like, Sams said. After answering questions about your household status, salary, retirement savings and lifestyle, the calculator estimates the amount of money you’ll need to retire and whether you will have enough.

Importantly, the calculator reveals the age at which your money may run out and how much you’ll need to make up the difference.

Sams suggested several strategies to bridge potential gaps between what you’ll have at a given age and what you’ll need. “It’s never too late to start saving and do a course correction,” she assured participants.

Working longer can build income in three ways, she said. You earn more money to build savings, boost your future Social Security payments and add to an individual retirement account (IRA) or employer-based 401(k) or 403(b) accounts.

Deciding when to take Social Security is a vitally important step in planning for retirement, Sams said. Claiming Social Security before one’s normal retirement age permanently reduces the monthly benefit for you and for survivors in the event of your death. Conversely, Social Security benefits increase by 8 percent for every year you delay claiming the benefit between normal retirement age and age 70. For example, a 67-year-old worker who decides not to claim Social Security until age 70 will receive a 24 percent increase in the monthly payment, Sams said.

The online AARP Social Security calculator helps individuals and couples learn about their claiming options.

If burdened with credit-card debt, Sams recommends limiting purchases when possible. “You can’t lower your debt if you keep adding to it. One tip is to take credit cards out of your wallet so you can’t make impulse purchases,” Sams said. She also suggested turning off the automatic credit card feature used by online retailers, so that you can’t order and charge something in one click. “Remove the temptation and save some money,” she said.

To pay down credit debt, you can take what Sams calls the “snowball” approach and eliminate small balances bit by bit or go “avalanche” and pay down substantial debt with the highest interest rates. Either way, she recommends, start reducing debt now.

Downsizing a home or apartment may also reduce monthly living expenses, such as utilities and insurance.

Careful budgeting at any age is a powerful way to take control of personal finances. “A lot of people don’t like the ‘b’ word,” Sams quipped, “but a budget is a solid tool to help you manage spending so you can achieve your goals and dreams.”

This free, informative workshop on retirement planning will be offered again, virtually, on the following dates:

  • Tuesday, August 24, at 7:00 p.m. Register here.
  • Tuesday, October 26, at 7:00 p.m. Register here.
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