AARP PRODUCTS & SERVICES   HEALTH   FINANCIAL   TRAVEL   DISCOUNTS   INSURANCE AARP.ORG HOME  |  Join AARP
Home > Your Goals > Getting Closer to Retirement > Closing the gap between what you have and what you need

Closing the gap between what you
have and what you need


If you've experimented with a calculator that estimates how much you need to save to have a comfortable retirement, you may feel that your working years will never end. The figures can be daunting: Social Security accounts for only about 42% of the average household's retirement income.

The number of working Americans who will collect a pension is down sharply from a generation ago.

That leaves savings, investments and working as a primary resource for most retirees. If there's a significant gap between your retirement income resources and what you need to pay the bills, here are some options to consider as you near retirement:

  1. Save more

    Of course! Even if you feel that you're saving as much as you can, look for ways to add to your savings and investments by inventorying your daily expenses. Evaluate all the small purchases you make — snacks, coffee, lottery tickets, magazines. If you cut back on these purchases by 50%, how much would it free up to add to your investments? Even $50 a month can add up over time.

  2. Work longer

    It may not be your top choice, but working longer is likely to be your strongest option because it has a TRIPLE impact on your ability to generate income when you actually do retire. Every additional year you remain on the job means

    1. One more year of retirement savings.
    2. One more year of tax-deferred compounding.
    3. One less year of drawing on your savings for income.

    It may not seem like much, but even working an additional two to five years can make the difference between a comfortable and an inadequate retirement income.

  3. Work part time

    Part time work is an good way to close the gap between your income needs and resources — but only for a period of time. After age 75, even part time work may be more challenging for the average worker. According to the Bureau of Labor Statistics, only 5% of workers are age 80 or older. One strategy is to combine part-time work with delayed Social Security benefits. But without a strategy, your fix may be short-lived.

  4. Look under the roof

    If you own your home, or a good portion of it, home equity can become one of your retirement income resources. A reverse mortgage can provide lifetime income, a strategy that is effective for individuals who are house rich and cash poor. Downsizing into a home that you can buy for cash can free up the money that you used to pay the mortgage — and may free up some additional capital as well. Many cities and towns cut property taxes for retirees who have lived in their homes for 10 years or more. Be sure to inquire about any tax breaks that you're entitled to receive.





AARP Financial Inc. does not provide tax advice. Please consult a tax advisor for information pertaining to your particular situation.

The information and content provided herein is general in nature and is for informational purposes only. It is not intended, and should not be construed, as a specific recommendation, or legal, tax or investment advice, or a legal opinion. Individuals should contact their own professional tax or investment advisors or other professionals to help answer questions about specific situations or needs prior to taking any action plan based on this information.

The Financial Advisors are investment adviser representatives of AARP Financial Inc., an investment adviser.

Click to Call





While AARP endorses the services provided by AARP Financial Inc., AARP does not offer financial products or services itself and cannot recommend that you or any specific individual should purchase any particular product or service. AARP Financial Inc. is an investment adviser and a subsidiary of AARP.