More Retirement Income

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Approaching retirement and afraid you won't have enough money to make your golden years truly golden? You're not alone. In fact, according to a recent study by Northwest Mutual, 32% of Americans fear running out of money in retirement.

And with good reason. After all, the average American's 401(k) balance is well under $100,000, and baby boomers -- the massive group of American citizens at or near retirement age today -- are in a particularly tough spot financially.

Fortunately, it isn't all doom and gloom. Here are three simple ways to bump your retirement income.

1. Boost your savings

This always sounds obvious, yet the vast majority of Americans are not saving enough. So let's go over the easiest, most painless way to boost your savings right now.

If your employer offers a 401(k), then you need to save through it and take full advantage of your employer match. That's free money you get from your employer just for saving some of your own money -- something you should be doing in the first place. Plus, traditional 401(k)s are tax-advantaged, so your money will grow interest-free, and you can also deduct your contributions from your taxable income in the year you make them. According to a Government Accountability Office report released last year, 16% of American workers who aren't saving for retirement have access to a 401(k) but aren't using it. Let's reduce that number.

If you're already maximizing your employer match, then consider raising the amount you're putting into your 401(k). The most painless way to do that is to funnel any raises you receive straight into your 401(k). If you contribute a set dollar amount, then increase that contribution by the amount of your raise. If you contribute a percentage of your salary, then any raises will automatically increase your 401(k) contributions. You won't miss that extra money, but you'll greatly accelerate your retirement savings, because you'll enhance the powerful effects of compounding.

A good goal is to save at least 10% of your salary -- and it's even better if you can save 15% to 20%. If you aren't there yet, then try increasing your savings by just 1% each year. That way, even if you only get a small annual raise to adjust for inflation, it won't sting to have more of each paycheck withheld.

2. Work in retirement (or delay retiring)

This suggestion won't be exactly popular, especially given that a lot of people retire earlier than planned (often because their employer buys them out or eliminates their job). But consider how working longer can benefit your financial, mental, and physical well-being. The financial benefit is obvious: If you're bringing in money, then you're spending less out of savings -- and if you're bringing in enough, you can even grow your savings. Instead of having to last 30 or 40 years, your savings may only have to provide income for 20 or 25 years. That's attractive enough on its own.

There's also the fact that mental health tends to decline during retirement, partly because of isolation and loneliness. Working part-time in retirement should help reduce some of those drawbacks while also providing retirees with a lower-stress lifestyle than their full-time brethren. And this all feeds into physical well-being: A study released earlier this year showed, remarkably, that delaying retirement helps to delay death. If that's not a good argument for delaying your retirement, then I don't know what is.

3. Delay taking Social Security

The typical American takes Social Security at 62, the earliest age at which most Americans can receive retirement benefits. But for every year you delay taking Social Security through age 70, the size of your income check from the government increases by 8%. Talk about a solid guaranteed return!

Your ability to delay Social Security benefits probably depends in large part on the first two suggestions, particularly given that many retirees rely on Social Security as their primary source of retirement income (something Social Security was never intended to be).

Start today

The most important thing you can do right now is make a plan for how much you will need in retirement. The 4% retirement rule -- whereby you take your total retirement savings and assume that you can withdraw 4% the first year and then increase that amount by inflation each year thereafter -- has its flaws, but it's a good starting point. Budget out your needs and wants in retirement, and then work the math backwards to figure out how much you'll need to save. And then use one (or more) of the suggestions above to grow your income in retirement and get the financially secure retirement you deserve.

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