CHAPTER
20

Taking Control of Your Financial Future

In This Chapter

• The best ways to save for retirement
• The differences between an IRA and a 401(k)
• How to find a financial advisor
• Ways to reduce expenses and downsize
• Taking advantage of time and the miracle of compounding

Here’s the good news: it’s never too late to take control of your financial future. Whether you have $1,000 in the bank or $500,000, if you’re still breathing and able to think, there are things you can do to help yourself right now but especially during your later years. Obviously, the sooner you begin to take control of your finances, the more you’ll be able to save. The key message here is that it’s up to you to do whatever it takes to improve your financial situation.

In this chapter, we’ll explore some of your options. For example, who says you have to retire at a certain age? You might live to be 100; do you really want to stop working when you’re in your 60s or even in your 50s? One important strategy you may want to consider is to keep working as long as you can and continue saving part of the income for those years when you can no longer work.

In an interview on the PBS show “Frontline” on February 6, 2006, Professor Alica Munnell, who is also Director of the Center for Retirement Research at Boston College’s Carroll School of Management, pointed out that continuing to work in their 60s is one of the key ways seniors can help themselves financially.

Ironically, now Professor Munnell’s suggestion that seniors keep working “until 63, 64, 65, or even 66” seems like she was aiming too low! With what’s been happening in the financial and housing markets in the ensuing years, we think it’s more likely that should now be “until even 76.” (Indeed, in her brief for the Center for Retirement Research, published in October 2013, Professor Munnell’s updated and revised view of retirement age is highlighted by the title of her brief: “Social Security’s Real Retirement Age Is 70.”)

Start Saving Now, Whatever Your Age

While you’re still working, start saving. If you’re like most Americans, you haven’t put much money away for retirement. According to Bankrate.com, one in three working Americans haven’t saved anything at all. A 2013 Retirement Confidence Survey sponsored by the Employee Benefit Research Institute, as reported by Philip Moeller in his article “Challenges of an Aging American Workforce,” found that 36 percent of the 1,254 individuals surveyed, including 251 retirees, had saved less than $10,000.

WORTH NOTING

According to a study sponsored by Merrill Lynch, Millennials—workers currently in their 20s and 30s—appear to be better savers than Baby Boomers or Generation Xers. The same study found Millennials expect to get 32 percent of their retirement income from personal savings and investments, while Boomers expected only 12 percent from these sources.

So start saving now. It’s never too late, whatever your age. The more you save now, the better you’ll feel later when you need the money because you can’t work any longer. Of course, becoming a saver after living most of your life as a spender isn’t going to be an easy adjustment. Following are a few tips to help you transition to this new saver lifestyle.

Start saving today. Don’t wait until it’s convenient. Pick a number you can live with and decide this is how much you’re going to put away every single week for your future. It may not sound like all that much, but let’s say you pick a conservative amount, $50. You make a commitment to save $50 every week. That’s $200 a month. Now if you multiply $200 a month by 12, that equals $2,400 for the year.

Let’s say you’re 60 now and you think you can easily keep working until age 70. If all you do is leave that $2,400 a year in the bank, even at 0 or .80 percent interest, that $2,400 will grow to at least $24,000, or even more, in 10 years.

After 5 years, when you have $12,000 put aside, you’ll probably be able to find a financial advisor who can direct you to a secure and safe investment option, where the minimum is $10,000 but the interest yield is at least 3 to 5 percent.

There might be some who are thinking that $24,000 is not a whole lot to get you through your retirement years. But of course, hopefully that savings account will keep growing, and it’s a lot more than the zero in savings that one in three Americans now have.

If you don’t think you can do this because you need every cent you make, take a hard look at what you’re spending your money on. Put what you spend into two categories, things you need and things you want. It’s in giving up some of those things you want but don’t need that you’ll find that money for savings. Eating out more than for just special occasions and buying things you don’t absolutely need are habits to start reversing.

If you don’t have a weekly or monthly budget, create one and then stick to it. Include the amount you decide to save so it becomes part of your weekly and monthly budgeting habit.

Pay off your high-interest credit cards, starting with the highest-interest card first, and working your way down through the lower-interest loans, such as student loans. You’ll at least get rid of debt and the interest that keeps accumulating, and you’ll become more of a “cash only” operation.

Become a comparison shopper for everything from food and gasoline to bank accounts to make sure you’re getting the most out of your money. Clip coupons and check out sale days, especially for seniors, because those savings can really add up.

Savings Options

Now that you’re finally saving, or now that you want to grow the savings you already have, consider these seven ways people in your situation save money for retirement:

1. Individual Retirement Accounts (IRAs) are accounts in which your earnings grow tax deferred. That means your contributions are tax deductible.
2. A Roth IRA is an account that also grows tax free, but your withdrawals are tax free as well because you’ve already paid taxes on your contributions.
3. A 401(k) or 403(b) is a retirement plan set up with your employer, either a company or an organization, who then deducts pre-tax contributions that grow tax deferred.
4. Keogh or profit sharing plans are for the self-employed and grow tax deferred. Your annual contributions are based on your income.
5. Tax-deferred annuities are usually sold by insurance companies and involve after-tax contributions, but annuities also grow tax deferred.
6. A life insurance policy that has a cash value can be a source of income. (This is known as whole life insurance, as opposed to term life.) You can borrow against your policy as tax-free income. (Some refer to whole life policies as “forced” savings.)
7. If you own your apartment or home, especially since the housing slump has been reversing, it’s probably continuing to build value. If you’ve accumulated enough equity in it, usually at least 50 percent of its current market value, you might be able to qualify for a reverse mortgage when you reach age 62.

Living in Retirement Longer Than You Work

The notion of living longer is usually comforting to most people, until they start thinking about how much it’s going to cost. Then they start thinking about what would happen if they outlive their money. Since so many Americans don’t have a very big nest egg, it won’t be that hard to outlive their money once they stop working.

The reality is that even the maximum Social Security benefits are not that huge. You may have to do something radical, like move to a place where the cost of living is dramatically lower, if continuing to work isn’t an option, or it’s an unpleasant one to consider. Doing things differently now could at least offer you some better retirement scenarios.

WORTH NOTING

When Social Security was created, the life expectancy for the American worker was 58 for men and 62 for women. People were never expected to live very long in retirement, whereas today you could live in retirement for as long as you worked.

Fortunately, as long as you and your spouse or eligible partner qualify for Social Security benefits, you probably will never outlive all your money. You can at least depend on something coming in every month.

But let’s say you make it into your 90s and are still in good health. If you retired at age 66, you’ve been living in retirement almost as long as you worked. You could easily live into your 100s, and longer in retirement than in your working years.

How are you going to fund those years, especially the later years when you can no longer work? Social Security benefits, although they could possibly let you get by, might not allow you to live the lifestyle you had dreamed of, especially when it comes to traveling to visit family members who are spread out or going on an occasional fun excursion.

Following are some options to consider to help you do things now that will give you more revenue during those nonworking retirement years. This will make it easier to pay for not just the extras in life, but even some of the necessities.

Contribute to Employer 401(k) Plans

If you’re working for a company or organization that offers a 401(k) or 403(b) retirement plan, sign up for it. In fact, don’t just sign up—make sure you’re contributing the maximum amount allowed each month. Your employer will probably contribute a certain percentage to the plan, too; but even if they don’t, you should.

Your contributions are taken out of your payroll check before taxes are calculated. The money you contribute will go into a mutual fund, company stock, or whatever securities are deemed acceptable to the plan. (This varies from plan to plan.) Then this money will grow tax deferred, which means you don’t pay any taxes on it until you withdraw the money. If you’re already in retirement when this happens, chances are you’ll be in a lower tax bracket so you even save on taxes.

WORTH NOTING

The 1978 IRS code that led to 401(k) plans was originally intended to give taxpayers a break on deferred income. In 1980, a benefits consultant named Ted Benna used the new code to create a tax-advantaged method of saving for retirement. He installed the first 401(k) plan for his employer, the Johnson Companies. For most companies today, 401(k)s have replaced pension plans.

If you’re over 50, you can contribute even more through “catch up” provisions. These also vary from plan to plan, so check with your employer on what their plan offers.

In most cases, your contributions are made pre-tax, meaning they’re deducted before taxes are taken out and continue to grow tax deferred. You don’t pay taxes until you take money out. The exception is if you use a Roth 401(k) account, which deducts the contributions after taxes are taken out. That means you don’t have to pay taxes when you take the money out later, because you’ve already paid them.

The IRS has a few restrictions on when you can withdraw this money. For example, if you use the 401(k) before turning 59½, you’ll pay a 10 percent excise tax on top of the regular tax you have to pay. There are a few exceptions, such as if you needed the money for paying unreimbursed medical expenses, buying a home, paying for college tuition, preventing foreclosure, paying funeral expenses, or repairing damage to a home.

There’s a required minimum distribution (RMD) starting on April 1st of the year you turn 70½. How much you’ll receive will be determined by your life expectancy based on actuarial tables used by the IRS. Of course, there are exceptions. One is if you’re still working, the RMD goes into effect on April 1st of the year after you retire. The other is if you contributed to a Roth 401(k), which doesn’t have an RMD.

If you change jobs or go to work for yourself, you can do a “rollover” whereby you roll the funds you’ve accumulated in one 401(k) plan into either another 401(k) or an Individual Retirement Account (IRA). When you do this, your retirement plan continues to grow tax deferred. Typically, there’s a time limit imposed, usually 60 days, for a rollover to have occurred. If you miss the deadline, the money will be taxed as ordinary income. If this happens before you’re 59½, the 10 percent additional tax will also apply.

For most employees, these plans have a maximum limit on how much you can contribute each year. For 2015, it’s $15,000, except for the catch-up contribution, which is another $6,000 for 2015. Roth 401(k)s have no limits.

After you’ve signed up for a 401(k), you have to decide where you want your money to go. Each plan will have a list of choices. This is an important decision to make because whatever you choose will determine how your retirement savings account will grow. This decision will determine how much you’ll have in the future. A typical plan will offer somewhere between 8 and 12 choices, although some plans give you a lot more choices and a few offer a lot less. Some plans offer only mutual funds, while others offer company stocks, or annuities and exchange traded funds (ETFs).

This is where having a financial advisor can really make a difference. (We discuss how to find a reliable financial advisor later.) He or she will be able to recommend an investment choice suitable to you that matches your risk tolerance. For example, if you’re risk averse, you may want to stay away from the stock market and stick to more stable investments that provide regular safe returns, such as government bonds.

Usually a 401(k) plan will have advisors available to help you make a choice based on a number of variables, including your age and how many years you have until retirement. The closer you get to retirement you should start to shift more of your 401(k) into so-called safer, less risky investments. For example, if you had most of your portfolio in the stock market in 2008 and 2009, you may have lost over half of your retirement savings. On the other hand, the problem with investments that protect your principal is they don’t grow at a very rapid pace.

Some plans offer variable annuities, which typically combine a group of funds that look like mutual funds but have protection guarantees or insurance that gives your survivors your principal if you die before you collect the benefits.

If your plan offers a brokerage account, you can invest in anything the brokerage firm has access to, such as stocks, bonds, mutual funds, and commodities like oil and gold. The positive side to this is you have even more choices, which is also the downside because it can become even harder to decide what to do. You could also buy and sell at a frequent pace that could, over time, erode your retirement savings.

Putting Money into an IRA

If you don’t have access to a 401(k), the next best alternative is an Individual Retirement Account, or IRA. An IRA allows you to save money and make investments that will grow tax deferred just like a 401(k). The main difference is your 401(k) is through an employer, while an IRA is an account you open and control on your own.

IRAs come in a few flavors: the traditional IRA, Roth IRA, SEP IRA, and SIMPLE IRA. Their rules and restrictions are, in a nutshell, as follows:

• Traditional IRA: You pay taxes when you take money out, which in retirement may be at a lower tax rate. Your money grows tax free. You must start withdrawing the money when you reach age 70½. There’s also a $5,000 per year contribution limit if you’re under 50.
• Roth IRA: You pay the taxes on your contributions so there will be no tax when you take the money out. The money grows tax free. You can leave your money in as long as you want, and you can withdraw money at any time with no penalty.
• SEP and SIMPLE IRAs: These are for the self-employed and small business owners. To set up a SIMPLE IRA, you have to have fewer than 100 employees who earn more than $5,000 each. A SEP, which stands for Simplified Employee Pension, is for small business owners and the self-employed who have no employees. For employees to be eligible for a SEP, they must be 21 years old, have worked for at least three of the last five years, and receive at least $550 for the tax year.

Finding a Financial Advisor for Your Investments

There’s a misconception that you have to be wealthy to be able to afford a financial advisor. This myth is perpetuated by the fact that some of the larger financial services institutions, such as Morgan Stanley, UBS, and Merrill Lynch, have Wealth Management Divisions with financial advisors serving the higher- and ultra-high-income segments of the country. While that’s true, there are still a number of banks and brokerage houses, such as Fidelity and Charles Schwab, that offer financial advice to almost anyone who asks.

Darrin Courtney, a Boston-area certified financial planner, recommends you work with a professional. He suggests finding “someone you trust to do the research and to find the best diversified mix of investment products and solutions about how to best meet your goals, knowing it might not be possible to meet all of them.”

Courtney points out most financial planners will offer a free consultation to help you decide if working with an expert is right for you.

TIP

The AARP has a relationship with Charles Schwab that offers members a free financial consultation without any obligation. Then if you want to open a Schwab account, to continue receiving advice all you need is a minimum of $10,000 you can invest.

If you can’t afford the services of a financial planner, Courtney says most local chapters of the Financial Planners Association (FPA) may offer pro bono assistance.

A new cottage industry of online financial advisors has also developed in recent years. They tend to offer services at reduced fees. For example, LearnVest has a one-time set-up fee that ranges from $89 to $399 and then charges a $19 per month fee that includes access to a Certified Financial Planner (CFP).

When looking for a financial advisor, you should try to find someone who has his or her CFP designation. That means they’ve passed a personal finance test so they should have at least enough knowledge to understand the basics.

If you want to limit your search to fee-only advisors, you can check with the National Associa-tion of Personal Financial Advisors (NAPFA), who are all fee-only. It’s probably wise to run a background check on whomever you choose, just to see if they’ve ever been convicted of a crime, or had a regulator investigate them. Then ask for references from current clients to find out if a particular advisor is right for you.

Tip

You can go to socialsecuritytiming.com for a free Social Security Calculator, as well as a list of Social Security advisors based on the zip code you enter into the website. Please note that this free site is not associated with the Social Security Administration. The National Association of Personal Financial Advisors also has a free database at their website to locate a financial advisor, based on the zip code you enter. Go to www.napfa.org.

D. Drummond Osborn is a fee-only financial advisor. He’s been helping people manage their money for over 20 years. Most of his clients have assets ranging from $100,000 to many million dollars. But, as Osborn notes, “The zeros in front of the decimal may differ, but the fear of running out of money is often the same.”

Osborn says that while a healthy relationship with money needs to be a balance of intellect and emotion, he’s found that most individuals address the issue from one perspective or the other. “The intellect has them eyeing an imaginary number that the retirement planning industry tells them will make them happy,” says Osborn, “while the emotional side either has the sky falling or a c’est la vie attitude.”

Osborn wants his clients to create a balance—beginning the process of how they want to live and the legacy they wish to leave behind—and then start talking about the numbers.

“While this approach doesn’t negate the possibility of running out of money,” he adds, “it does empower people to address the reality of their financial life. There are almost always ways to avoid running out of money; unfortunately the majority of people are unwilling to face the right/hard choices.”

The significance of choosing the right financial advisor cannot be emphasized enough. Think of the thousands of investors who were cheated by Bernie Madoff, whose Ponzi scheme lost money into the billions for individual investors who lost their life savings, and companies and institutions that lost millions of dollars that were supposed to fund pensions and other funds.

However, you have to be careful that being afraid of picking an unscrupulous financial advisor justifies you making all these financial decisions on your own. Unless you take the time to really learn about the various financial options available to you, as well as to monitor your investments so that your savings can grow at a reasonable rate, trying to do it all yourself might lead you to make poor financial decisions.

An eldercare attorney might also be able to advise you on an asset protection plan that makes the most sense for you and your family. No two situations are the same, so if possible, seek help and work with someone who has the expertise to guide you to make the best financial decisions in your older years and avoid outliving your money.

Ways to Cut Expenses

Co-author Jan Yager originally became aware of frugality expert Judy Woodward Bates for Jan’s “Boomers: Don’t Outlive Your Money” article for the online column “Boomerific.” Bates, who coined the term bargainomics, has a weekly show on how to save money on Fox-6 News TV in Birmingham, Alabama, is seen the first Thursday of each month on Good Day Alabama!, and is the author of Bargainomics: Money Management by the Book. She credits her grandmother who showed her by example how to be thrifty and also her own parents who, when Judy decided to get married at the age of 17, announced to her that if she was going to do that, she and her husband would also have to make it on their own financially. And they did.

Judy prides herself on the fact that they have never had a large income and “never needed one” because “we’ve learned to live and live well within our income.” Judy is dedicated to spreading the word that it’s possible to live happily within your means.

Here are some of her tips:

• She doesn’t eat out unless it’s a two-for-one deal or an early-bird special. She uses discount coupons to help offset the cost of eating out through Groupon, restaurant.com, or currentcodes.com. She goes to currentcodes.com first, gets a code, and then goes to restaurant.com so she’ll pay just $3 for a $25-off certificate that would have cost her $10 without the code.
• She uses a local entertainment.com book and if she’s going to any major city for even a couple of days, she’ll get one of those books because it helps her save a lot of money. She especially likes the certificates for movie ticket admissions.

Do You Really Need 1,000 Cable Channels?

Being more frugal is an approach to spending that you can embrace if you really want to, although it takes some work, just like learning to eat healthier and exercise. Of course, you don’t have to go to the extreme of one couple we know who sold almost all their possessions to live in an RV for a couple of years before relocating to Florida. But you can start with little changes, such as comparison shopping for the best cable provider for the money, if you even need cable service, depending on your viewing habits. If you mostly watch network TV anyway, maybe it’s time to rely on just basic cable if you need it for TV reception in your area.

Buy yourself a little notebook, or use your smartphone, to keep track of every single penny you’re spending, and what you’re spending it on. You’ll be amazed just how much you can save when you see your spending patterns.

If you have a problem with overspending, consider joining a local chapter of Debtors Anonymous (DA), a program founded on the Twelve Step principles of Alcoholics Anonymous. It will teach you how to track, and better control, your spending; it may also help you get to the root causes of your overspending.

For optional purchases, rather than buying something the first time you see it in the store, make a mental note about your selection, give yourself 24 to 48 hours to reconsider it, and buy it only upon returning to the store after you’ve reassured yourself that the purchase is truly necessary.

Use a no-interest layaway plan to purchase gifts or holiday items, getting out of the habit of putting things on a credit card unless you’re that rare individual who is disciplined enough to use a credit card but completely pay off the balance when the bill is due.

Consider an Electric or Hybrid Car

If you use your car only for short trips, an electric car could save you thousands of dollars a year by not having to fill up at the pump every week. If you drive a bit farther, you can consider a plug-in hybrid that also uses gasoline, which extends your mileage range. You also save money on maintenance. There are no more oil changes, and wear and tear on other parts is typically less than gas-powered cars.

Then there are the tax credits to think about. The Federal government gives you a $7,500 federal income tax credit, and several states offer their own tax credits. That way you could get an electric car like the Nissan Leaf or a Ford Fusion hybrid that typically sell for $30,000 for less than $20,000 when you figure in the tax breaks. And if you decide to lease one of these cars, leasing companies will often take the tax credits and lower your monthly lease payments.

Pay Off Credit Card Debt

You’ve heard it before. Getting out of credit card debt as you head into your potential retirement years is more important than ever before. Make it one of your top financial priorities. You might even be able to stop using credit cards altogether.

Study your credit card statements, whether online or paper, and put them in this order: the highest-interest rate card is first, followed by the second highest, and so on. Then focus on paying off the highest-interest card first by doubling the minimum payment each month. Continue to make the minimum payments on the rest until the highest one is paid off, and then do the same thing with the next highest-rate card.

If you can, transfer balances on higher-rate cards to lower-rate cards. Just make sure you don’t use these cards to incur more debt. Be careful with those 0 percent come-ons. They usually include transfer fees that often cost you more in the end. Also, even if it’s 0 percent for a certain period of time, it will go to an APR, as high as 13 to 19 percent or higher, and if you don’t pay off the balance that interest will start to add up fast.

CAUTION

Another reason to pay off your credit card debt is that any travel plans you have may impact your ability to get your credit card statements. These must be paid on time or you get charged a late fee, as much as $35, and can have your APR increased to the maximum delinquency rate allowed—as high as 29 percent. If you’re traveling and have credit card payments due, pay them online or call the customer service number on your card and pay by phone. You can also sign up to have the minimum payment due automatically deducted from your checking account each month.

Grow Your Own Vegetables

Growing your own vegetables is actually becoming more popular, especially among the Baby Boomer generation. It’s also a lot easier than you can imagine. And as money savers go, you can’t beat it. Vegetables are becoming the most expensive item in the supermarket. Even if you shop at farmer’s markets, you can spend as much as four dollars on two large, choice tomatoes.

Guess what? Tomatoes are one of the easiest vegetables to grow. The most important thing is to grow only those vegetables you like to eat. Plus, you don’t need a lot of land. You can grow most vegetables in any containers that will hold soil, water, and seeds.

Growing your own vegetables will not only cut your food bill by as much as 50 percent, but the vegetables will be fresher and taste better.

Downsize by Moving to a Smaller House

Do you really need a five-bedroom house now that the kids have moved out? Companies downsize all the time to bring expenses in line. Why can’t you?

Think of the money you could save by selling your current home and moving into a smaller house or renting an apartment. But be careful that you really will save money by doing this. There are costs related to moving that have to be considered. Also, if you bought at a time when houses were a lot less expensive, it might be hard to find something in the area you want to live that’s as cost-effective as your mortgage.

With a smaller home or apartment, you might save on the cost of the upkeep of your home, including lower property taxes and heating and electric bills.

You might also consider renting instead of buying a new home, and invest or save any profits you get from the sale of your original home.

Where you live can be one of the biggest cost issues you’ll need to address. In addition to moving to a smaller home, you can also consider relocating to a less expensive community, another state, or even another country where your dollars will go farther.

Manage Your Credit Rating

You may not know it, but the better your credit rating, the cheaper your credit. Your credit rating will impact the interest rate you’ll pay for a car loan or a mortgage. That’s why it’s important to keep your credit score as high as possible.

Even if you pay your credit card bills on time, how much you charge to your credit card will impact your score. And you may think it’s a good idea to cancel those credit cards you rarely use, but it’s not. Canceling credit cards could hurt your credit score.

It’s also important to check your credit report once every few months just to make sure your credit history is up to date and accurate, and there is no fraudulent activity. To do this, you can go to freecreditscore.com or creditkarma.com.

Credit scores range from 300 to 850 and you should at least maintain a score over 680. To do this, make sure you pay your credit card bills on time because payment history counts for 31 percent of your score. One late payment could give you a black mark on your credit history, so if you’re late on a payment, call the card company and explain why. Most lenders will give you a break if you’ve been a good customer with a strong payment history.

Another factor determining your score (30 percent) is how much you owe on each card. If it’s more than 50 percent of your total available credit, it can lower your score. If you’re close to 50 percent, you may want to postpone putting any large purchases on your card until you’ve paid down your balance.

The Miracle of Compounding

If time is still on your side, meaning you’re in your late 40s or 50s or even younger, you have an opportunity to take advantage of what’s called “the miracle of compounding.” You can save a lot of money with fairly little effort when you add any interest or capital gains you get to the principal of your savings or investment. That added amount also earns interest and capital gains, and this process is called “compounding.”

Here’s how it becomes a miracle. Let’s say you were able to put $10,000 into an IRA when you were 40 and that IRA earned an average of 10 percent per year. By the time you turn 70, that $10,000 would be worth $174,494. Moreover, $134,494 of that would have come from the miracle of compounding. Without compounding, your $10,000 would only have grown to $40,000 earning 10 percent per year.

What’s the message here? If time is still on your side, take advantage of it. Even if you didn’t start saving that $10,000 until you were 50, at age 70, it would be worth $67,275. Even if you’re in your 60s or beyond and this advice is no longer going to reap the benefits for you that it would have if you were younger, if you have children or grandchildren, give them a huge gift of this approach to saving. At least you’ll have the satisfaction of knowing you inspired the next generation or two to do better at handling their money.

Turning Around Your Reversals of Fortune

Now that we’ve shared with you the gift you can give your younger children or grandchildren, let’s turn back to those of you who are in your late 50s, 60s, or beyond. What can you do to make your Social Security, disability, or survivors benefits last longer? Through your hard work of at least 40 work credits, and meeting other eligibility requirements, you have earned those monthly benefits. So how can you make that income last whether it’s the average of $1,180 or the maximum amount of $2,366 for someone retiring at full retirement age?

Here are some suggestions:

• Stop living beyond your means. That’s a lot easier said than done, but it’s possible to prune down your spending. Consider selecting products on the basis of price, if everything else is equal.
• Pare down to the necessities. This is a time in your life when less really is more.
• Consider changing your eating habits so that you get high-quality protein sources that are less expensive. Although co-author Jan is a vegetarian again after a hiatus from vegetarianism for many decades, she’s finding the meatless lifestyle very nutritious, easier than it used to be due to all the products now available, and also less expensive. Even if you just have one day a week that’s meatless, you can save money that way.
• Pay off your credit card debt so you don’t continue to incur more debt from the interest. Allow yourself only one credit card and pick one with a low APR that also suits your spending habits. Go to creditcards.com or to the websites for individual companies that offer cards, such as citicard.com, capitalone.com, or Americanexpress.com. Compare what the cards offer, as well as any fees. Pick that one card wisely so you have it for emergencies or for travel.
• Spend wisely, especially for gifts and around the holidays. Create a firm budget for your spending. “I won’t spend more than $20 for a birthday present” or “I will get all the gifts for the holidays this year for $250 or less.” If you receive a gift you don’t like or need, don’t be shy about exchanging it for something you do need or even for a gift for someone else.
• If you’re in your 50s or 60s and you haven’t taken your Social Security benefits yet, see if you can hold out until age 70. It’s so hard to resist taking the money as soon as you’re eligible, whether that’s 62 or full retirement age at 66 or 67. But, as we’ve seen throughout this book, if you can possibly hang in there until 70, whether or not you continue working, your benefits grow 8 percent each year until age 70. With the possibility that you’ll live until you’re 90, 100, or beyond, the increased monthly benefits will be substantial. Yes, it’s a guessing game, and a huge challenge to make the right guess. Is it better to have that bird in the hand at 66 on the chance you might not live until 70?
• It’s never too late to create a retirement plan. Maybe you and your spouse have not had the talk before. For whatever reason you put that talk off, have it now. What are your hopes, goals, and dreams for retirement? Can you see yourself moving to a smaller home, or to another community that’s less expensive? Do you need as many cars as when you both worked full time? Is it time to reconsider your cell phone carrier or cable TV service provider?

The Least You Need to Know

• No matter what your age, it’s never too late to start saving. Don’t wait until tomorrow. Even if you save only $50 a week, you’ll have $24,000 in 10 years!
• If you’re still working and your employer offers a 401(k), sign up for it. There are many tax and savings advantages to participating in a 401(k) that will help your retirement portfolio.
• To make your Social Security benefits last, whatever amount you’re receiving, start living within your means. Curb your spending and become more frugal in your lifestyle.
• Pay off any high-interest credit cards, and allow yourself only one credit card for emergencies and travel expenses. Pick a card with a low APR, or, even better, a 0 APR for a period of time, followed by a low APR, and without an annual fee attached to it.