How Much Should I Save For Retirement?

Hello!

Welcome to people approaching retirement age. This website and/or page is really for anyone who is looking ahead to retirement, someone who might have 20 plus years, 10 plus years, 5 plus years or it’s knocking at your door. The question in the title “How Much Should I Save For Retirement” is a pretty loaded question. I guess it would depend on what you need to feel comfortable. How much a month do you currently live on now? Usually the expectation is to have 70% to 80% less, but did you save that amount of money?

Let’s break down some reality here. Let’s say you save $50,000 per year for retirement. You retire at age 62 and live to 82 years old, 20 years, for $50,000 per year you need $1,000,000, yes a MILLION dollars to live for 20 years and only spend $50,000 per year. Well I don’t know about most of you, I don’t have a million dollars saved. I barely have $100,000 saved in my 403 (b) from a previous employer. I am hoping the stock market don’t crash before I can take it out at 59 1/2 and not lose it like people did in the past.

 

What is the Best Way to Save for Retirement?

Here are some of the top 10 things you can do to prepare yourself for retirement.

1. Get rid of all debt – including house payment, This is huge!
2. Set Goals- create a budget
3. Add 15% or more towards 401(k) or Roth IRA
4. Use Auto Direct Deposit to save
5. Lower your cost of living expenses
6. Downsize – if you still have a huge house? The kids have moved out, get a smaller house
7. Put all your tax refund into a savings or retirement account
8. Start creating weekly meal plans
9. Pack your lunch – eating out for lunch daily is costly
10. Educate yourself
    to new opportunities

How to Earn Extra Money Online

You can become a user experience tester – you would test websites for businesses and give feedback

Do you have any teaching skills? Become an Online Tutor, the online tutoring companies like TutorMe, Tutor.com and Studypool, hire tutors to help students on a wide variety of subjects.

Be a Survey taker – there are survey sites like Vindale Research, MyPoints and Survey Junkie. It’s an opportunity that could add up over time.

Use Mobile Apps to get Cash Back, I am not sure what they pay is but, here is some apps to look at; Dosh, lbotta, shopkick, Rakuten, Receipt, and Hog.

Put your creative skills to work. Do you do graphic design, editing or writing? You can do freelance work in your spare time with a company like Fiverr, FlexJob, Freelancer, and upwork to name a few.

Get paid to post on Social Media! If you have a large following on social media like Instagram and Facebook, you could become an influencer., who knew?

If you have a nice camera and take nice pictures you can try to sell your pictures on like. There are sites that will pay you if someone purchases your pictures. I found sites like Wix, Shopify, ClickASnap and WordPress, you make money by posting your pictures to these sites for people to purchase. Some of these are free to start and some have monthly fee’s as low as $10 and up. The free part you only can upload 7 photos per week and of course there is paid monthly and yearly options that could be costly.

IRS Definition of a Passive Income

First off let’s define a passive income. A passive income is income that is working for you. Income that you don’t have to put much effort into it, to earn an income. The quote is “work smarter, not harder” is the mentality of having a passive income.

Here is the IRS’s definition of passive income

For purposes of defining a business enterprise
as the active conduct of a trade or business, it is important to
distinguish gross income from active conduct of a business from income
derived from passive sources. Gross income from passive sources
includes:

1. Dividends, interest, and annuities.
2. Royalties (including overriding royalties), whether measured by production or by gross or taxable income from the property.
3. Rents from real property, and from personal property leased with
   real property if the rents from the personal property are an incidental
   amount of the total rents under the lease (determined at the time the
   personal property is placed in service). Rents are not considered gross
   income from passive sources if more than 50% of the total rent under
   the lease is for personal property, or if the determination of the
   amount of rent depends in whole or in part on the income or profits
   received from the leased property (unless the amount is based on fixed
   percentages of gross receipts or sales).
4. Gains from sales, exchanges, or other dispositions of property other than:
   • Stock in trade or property of a kind which would properly be
     incredible in inventory if on hand at the close of the taxable year; or
     property held primarily for sale to customers in the ordinary course of
     business.
   • Gains or losses on the lapse or termination of options written by
     the organization in connection with its investment activities to buy or
     sell securities.
   • Gains from cutting timber, that upon election may be considered a sale or exchange(section 631)
5. Income from the sale of goods if the seller does not manufacture,
   produce, physically receive or deliver, negotiate sales of, or keep
   inventories in the goods

Information above is from the IRS Website.

 

The IRS defines passive activities as any business in which the taxpayer doesn’t materially participate or any rental activity. It specifically excludes portfolio and investment income from the definition of passive activity income. Check with your accountant for accuracy of how you will be taxed based on how much is made.

 

The Best Ways To Earn A Passive Income

There are several options to earning a passive income for people approaching retirement age, here are a few ideas to consider.

Real Estate Investment – You could become a landlord or invest in vacation property. If you are able to purchase a nice place where you want to retire. Like a small bungalow on the beach or condo, or in the mountains, or the southwest and rent it out the majority of the time. That would be a great way to get the place where you want to retire eventually, get it paid off and earn a passive income. You can pick and chose what date you want to use the vacation property, then rent out the rest of the year.

 

Lending Club – This allows passive investors to diversify their assets by investing in people’s loans. The lending club allows you to invest as little as $25 to invest in a loan. The return on investment depends on the type of loan you choose to depend on your risk level.

Invest in Stocks that pay Dividend – Dividend are profits paid to stock holder. Some companies pay out dividends regularly, which could be a source of passive income. This is probably the most risky. Before investing in the stock market do your homework and understand the risk before investing.

High Interest Savings Account – Keeping your money in a traditional savings account, will not give you much interest at all. The best high interest banks are only online. I learned as of 2020 some of the high interest savings accounts are giving as much as 0.80% interest. So if you have $100,000 in the high interest account, you would get $800 of interest for the year. Much better than the big banks.

Affiliate Marketing – Have you ever wanted to earn an income by writing a blog about a niche you are passionate about? Many blog owners earn an income by using affiliate links on their blog website. How affiliate marketing works, is you promote products and services, someone purchases the product or service, you make a commission. If this is something you are interested, I highly recommend Wealthy Affiliate. You can start for free, and have a website up and running before training is completed. There are reports of people making up to $5,000 on up per month. It’s an easy way to make a passive income for people approaching retirement age.  Check my review for Wealthy Affiliate.

Writing a book or e-book – Are you a creative writer? Have something to say or share? Write a book! The initial work is writing the book. You could write for any type of audience and any subject that is interesting to the public. You can sell the book or e-book on Amazon or other platform to sell your book.

Music Rights – Are you a musician and make good music other people want to hear? Sell your music. The other thing is some musicians sell future royalties because they need money for whatever reason. They sell a portion of their future royalties to investors. There are platforms to connect the artist with the investor.

Create an Online Course – Is there something you know how to do and what to share how to do it? Create a class online, using platforms available to promote and sell your class. Teachings can be done, via video, e-book or emails.

Create YouTube Videos – When creating YouTube videos for a subject you are passionate about, you can earn money from the ad’s you advertise in your video. This is a growing trend. People are creating YouTube videos for just about any niche out there.

My Final thoughts

As you can see there are many options to making money online and creating a passive income. You just need to see what will work for you. Also, please check with your accountant for current tax laws and the different tax brackets for taxable income. I am not a tax or financial advisor.

I am just a person who is approaching retirement age and looking to add income for my retirement years. Personally for me, I am trying out the affiliate marketing angle with Wealthy Affiliate. There are many success stories from people who have started affiliate marketing through them.

The answer to how much should I save for retirement?, would depend on how much are you planning on spending monthly until you go home to be in heaven.
If you need additional income the options above are viable to help live comfortably in your retirement years.

 

I hope you found this post helpful and thought-provoking to make you think about when you are approaching retirement age to make a plan, to enjoy your retirement life. Just remember to stop and smell the roses and have a picnic!

Please leave a comment below, I would love to hear your ideas for a passive income and if you currently are making a passive income.

 

Cheers!

Chris