The rule of thumb for retirement income is that you’ll need at least 80% of your pre-retirement income to retire comfortably. If you make around $63,000 a year, you will need at least $50,000 a year to retire comfortably. For people who make more than $63,000 a year, retiring on $50,000 a year may sound challenging, but it doesn’t have to be. While you may have to make some lifestyle changes after you stop working, these strategies can help you learn how to retire well on $50K a year.
Pay Off All Your Debt Before Retirement
The first strategy is to pay off all your debt before retirement. Do this, and all the money you have monthly in retirement can be used for your current needs, not servicing debt. By paying off your debt before retirement, your money will stretch much further. For instance, if you’re retiring on $50K a month, you’re living on approximately $4,166, minus whatever taxes you may have to pay. If you have a $1,300 a month house payment, you’re down to $2,866 a month to live on. Add in a car payment at $450 a month, and now you’re down to $2,416 a month. Add in credit card payments of $200 a month, and you have only $2,216 for all of your other monthly expenses. You can also try Tally, they are an automated credit card payoff app that works for people who want to retire debt-free.
By entering retirement without any debt, you’re increasing the amount of money you have to live on because it’s all yours to use in the present. In the above scenario, by paying off debt, you recoup $1,950 a month not going to service debt. That makes a huge difference in the amount of money you have to utilize each month.
Delay Retirement as Long as Possible
If you’re still healthy and enjoy working, try to delay your retirement as long as possible. This helps you in several ways.
Increases Your Social Security
For each year you can wait to retire beyond your official Social Security retirement age, you can increase your Social Security monthly amount by 8%. Every little bit helps, and if you wait three years beyond your official retirement age, you can get 24% more in Social Security benefits every month. For instance, perhaps you would earn $2,300 a month when you retire at the age of 67. However, if you don’t retire until 70, you will then earn $2,852 a month. If you live to 90, delaying your retirement earned you an additional $132,480 in Social Security benefits.
Gives Your Retirement Savings Longer to Grow
The longer you work and don’t tap into retirement savings, the more that money can continue to grow thanks to compound interest. Not only do you benefit from interest compounding, but you also benefit because you’re able to continue to contribute to your retirement.
Less Time to Use Your Retirement Money
If you retire at 63 and live to 90, your retirement funds need to stretch for 27 years. If you retire at 70 and die at 90, your retirement funds only need to stretch for 20 years. Assume you’re retiring on $50K a year. By retiring at 63 instead of 70, you’ll need an additional $350,000 to maintain the same standard of living throughout your retirement.
Move to a Lower Cost of Living Area
Another way to stretch your retirement is to move to a lower cost of living area. If you live in a high cost of living area like New York City or San Francisco, you know that you will not be able to retire on $50K a year. Moving is a necessity. However, you can choose to move within the United States or to live abroad
How to Retire Well in the United States
How to retire well on $50K? Choose a location that meets all of your needs and fits within your budget. Luckily, within the United States, there are many options to choose from.
Many people immediately think of the deep South, and the cost of living there is cheaper. However, if you don’t want to move to the South, Yahoo! put together a list of places in every state where you can live for $50K or less. If you currently live in San Francisco and don’t want to leave the Golden State, you can move to somewhere like Tulare, California to live comfortably.
How to Retire Well Abroad
If you’re more adventurous, you may want to consider retiring abroad. Many Americans choose this route to stretch their retirement dollars. In some locations, especially in Eastern Asia, such as Vietnam and Malaysia, you can live comfortably on $30K a year. International Living suggests the 10 best countries for Americans to live in. Surprisingly, France makes the list (it is affordable outside of the big cities) as well as a few other European countries and some South and Central American countries.
However, retiring abroad isn’t for the faint of heart. You will likely need to learn a second language to communicate with the locals, and you have to be open to new cultures and traditions. You also need to ask yourself if you can be far away from your kids, grandkids, and friends for months at a time.
Before taking the leap to retire abroad, take an extended trip to the location you are considering to see if you like it.
You can absolutely retire well on $50K. The secret to doing so is to pay off your debt before you retire, work as long as you’re able to, and move to a lower cost of living area if you currently live in a high cost of living area. After you’ve figured out how to retire well, enjoy your retirement. You deserve it after years of hard work!
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