9 Tips for Retiring Rich on One Income

9 Tips for Retiring Rich on One Income

In the present day, many individuals and couples find themselves relying on more than one source of income to manage the challenges of a high cost of living, while simultaneously fulfilling family responsibilities and planning for retirement and other financial objectives, both short-term and long-term.

However, not everyone can or desires to rely on multiple incomes. In certain households, it may make more sense for one person to be employed while the other takes on essential responsibilities, both within and outside the home.

Whether you are preparing for retirement individually or alongside a partner, achieving financial security, if not wealth, on a single income is a realistic goal. It demands thoughtful planning and wise financial decisions. Here are eight strategies to help you get started:

  1. Increase Your Earnings: It may sound familiar, but actively seeking opportunities to boost your income can have a significant impact. Continuously develop your professional skills and be on the lookout for promotions and salary increases. Exploring supplementary income sources, some of which may generate passive income, can also be valuable. Jeff Rose, CFP, and founder of Good Financial Cents, suggests capitalizing on your passions, whether through freelancing, consulting, or product sales, to channel extra income directly into your retirement savings.
  2. Create a Household Budget: If you do not already have a budget in place, establishing one is essential. Even if you do, it’s wise to periodically review and adjust it, particularly when significant changes occur in your financial situation. You can tackle this task independently or collaboratively with your partner. Jeff Rose advises that the non-working spouse can excel in budgeting, ensuring the household operates smoothly while optimizing savings. As you formulate your budget, account for long-term living expenses and healthcare costs, as they can significantly impact your retirement financials.
  3. Debt Repayment: If you currently have debt, whether it involves auto loans, mortgages, credit card balances, or other obligations, concentrate on eliminating it. Becoming debt-free as early as possible enables you to direct more resources towards savings, investments, and retirement planning. Bryan Cannon, CEO at Cannon Advisors, recommends prioritizing the settlement of high-interest debts to free up funds for savings and investments. If you have a partner, they can contribute by participating in debt reduction and supporting the working spouse’s career advancement, thereby enhancing the overall financial well-being of the household.
  4. Maximize Your Retirement Contributions: One effective method to secure a prosperous retirement is to maximize your contributions to retirement plans annually. Initiate this practice as early as possible and, when feasible, apply it to both employer-sponsored retirement plans, such as a 401(k), and individual retirement accounts (IRAs) in your possession.
  5. For your employer-sponsored plan, ascertain if your employer offers matching contributions and seize this opportunity. Jeff Rose advises, “If your employer matches your contributions, strive to contribute enough to capitalize on the full match—essentially, it’s free money. According to the U.S. Bureau of Labor Statistics, the average employer 401(k) match is 3.5%.” In 2023, the 401(k) contribution limit for individuals stands at $22,500, exclusive of employer contributions. Once you reach the age of 50, you can make additional catch-up contributions of $7,500 per year. Additionally, ensure you make the most of your contributions to any IRAs you hold. The annual contribution limit for IRAs is $6,500, with a higher limit of $7,500 applicable to individuals aged 50 and above. Jeff Rose underscores the value of contributing to an IRA, even alongside a 401(k), as it can offer additional tax advantages and augment your retirement savings.
  6. Diversify Your Investment Portfolio: Recognize that the investments you make at present will likely constitute a substantial portion of your retirement income. Hence, it is prudent to commence investing as soon as possible and remain adaptable to adjustments along the way. Bryan Cannon recommends developing a diversified investment strategy aligned with your risk tolerance and timeframes. Regularly review and modify your portfolio to ensure it remains in sync with your objectives.
  7. Invest in Established Ventures: If you have surplus funds, consider channeling them into established businesses to generate wealth and financial security. As financial expert Stearn suggests, investing in small businesses, such as rental properties or franchises of well-known chain businesses, can be a pathway to a prosperous retirement. Furthermore, if you have a life partner, joint investments in such endeavors can be advantageous. They may not only support you as a life partner but also become your business partner, assisting in managing various tasks that may be challenging to address while you focus on maximizing your earnings.
  8. Delay Retirement: Delaying your retirement can significantly impact your financial preparedness for retirement. Most retirees live on a fixed income, so postponing retirement and holding off on collecting Social Security benefits can lead to more substantial payouts in the long run. Even a one- or two-year delay can result in significantly higher benefit amounts than collecting prematurely.
  9. Engage in Financial Discussions Together: In cases where you have a partner, financial planning should be a collaborative effort, even when relying on a single income. Jeff Rose emphasizes that active participation in financial planning and decision-making is vital for ensuring that both partners work harmoniously toward their retirement objectives. Effective communication, shared financial planning, and a collaborative approach to achieving these goals are pivotal for a successful journey toward a comfortable retirement on a single income. Furthermore, exploring opportunities for supplementary income, ongoing financial education, and prioritizing health and wellness are essential steps that both partners can take together.
Post Disclaimer

Disclaimer: The views, suggestions, and opinions expressed here are the sole responsibility of the experts. No Sandiego Currents journalist was involved in the writing and production of this article.

You might also like …