Golden Egg in Nest with Thousands of Dollars on Table.
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Golden Egg in Nest with Thousands of Dollars on Table.

In recent articles, focus was given to the importance of preparing for retirement and securing the right pension plan. The points given in those articles are truly significant to a happy retirement.

Overtime, many persons have found creative ways to ensure that their ‘nest egg’ is at the level that they desire by the time they decide to retire. Let us look at a few of the unconventional strategies that you can employ as alternatives to the conventional pension saving plans.

Retire debt-free

If you subscribe to the 4% rule, for every $1,000 in income you need each year, you’ll need about $25,000 in assets. If your house payment is $1,000 per month, you’ll need a $300,000 nest egg just to generate the payment. Retiring debt-free and the need for that income (and the corresponding asset) go out the window. Debt and income need go hand in hand. The more debt you have, the more income you will need.

Let your paycheck be your portfolio

Using the arithmetic above, a $20,000 income is the functional equivalent of a $500,000 portfolio. If you don’t have the portfolio, another way to generate that same amount of income would be to trade some of your time or expertise for it by working longer, working part- time or starting a small business. Done correctly, this solution can generate the income you need while leaving plenty of time to pursue your other interests.

Maximise your hidden balance sheet

During your working years, you put 6.2% of every dollar you earn (up to certain limits) into social security. Your employer adds another 6.2%. If that were your 401(k), would you do everything possible to maximise the distributions from that asset? Of course you would. Yet, most people claim social security benefits at 62, which is almost universally a bad idea.

There are a number of claiming strategies you can use to maximise your benefits. Most people don’t use them and end up missing out on $100,000 or more of income.

Move to a place where your dollar will go further

If you’re ready to retire, but your nest egg isn’t, one option is to delay retirement and give your portfolio a chance to grow. Another option would be to move to a location where your dollar will go further. For example, it’s much cheaper to live in New Mexico than New Jersey.

Draw money in a tax-efficient way

If you’re like most people, some of your accounts are taxable and some are tax-deferred or even tax-free. Which should you draw from first in retirement? Choose wisely, because your choice could add years to the life of your nest egg. (hint: you should usually take the taxable first.)

Take a medical vacation

Do you have health problems? For example an open-heart surgery will set you back about $100,000 in the U.S. buy a plane ticket to Narayana Hrudayalaya Health Center in Southern India, and you can get that same surgery for around $2,000. It has the world’s largest cardiac hospital and they perform more open-heart surgeries than any hospital in the world. consequently, they have pioneered several new techniques and the results are excellent (they boast a 98% survival rate). Of course, quality of care is a primary concern.

Travel cheaper

If you love to travel, but don’t love paying for it, “travel hacking” might be for you. That is where you use creative ways to rack up rewards with airline and hotel loyalty programmes.

Those are just a few of the unconventional strategies you can use to help your retirement dollars go further. some might work for you. Others might not. The important thing to remember is that your nest egg is only one arrow in your quiver. Keep an open mind and you’ll likely find more than one way to solve your retirement income problem.

By Aaron Crotty

To contact Aaron for financial advice, please email him at aaron.crotty@arloassociates. com

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