Planning for retirement involves careful consideration of your anticipated lifestyle and desired retirement age. However, as retirement approaches, you might find that your projected income may not fully support your needs. If you anticipate such a shortfall, it’s essential to implement strategies to bridge this potential retirement income gap.

Delay Retirement: 65 Is Just a Number

One effective approach to addressing an income shortfall is to remain in the workforce longer than initially planned. This decision allows you to:

Continue Earning a Salary: Sustaining employment means relying on your income rather than tapping into retirement savings prematurely.​

Increase Social Security Benefits: Delaying Social Security benefits can result in higher monthly payments. For example, for each year you delay receiving benefits past your full retirement age (up to age 70), your benefit increases.​

Postpone Retirement Account Withdrawals: Continuing to work enables you to defer withdrawals from retirement accounts, allowing your investments more time to grow.​

It’s important to note that:

Full Retirement Age (FRA): This varies depending on your birth year. For example, individuals born in 1960 or later reach full retirement age at 67.

Earnings Limitations: If you claim Social Security benefits before reaching FRA and continue to work, your benefits may be reduced. In 2025, the earnings limit is $23,400. Earnings above this limit result in a $1 reduction in benefits for every $2 earned over the threshold. However, once you reach FRA, there are no penalties for additional earnings. ​

Required Minimum Distributions (RMDs): As of 2025, you must begin taking RMDs from your retirement accounts at age 73. This means you can continue contributing to tax-deferred accounts longer, potentially enhancing your retirement savings. ​

Spend Less, Save More

Adjusting your spending habits can significantly impact your retirement readiness. Consider the following strategies:

• Refinance Your Mortgage: If interest rates have decreased since you secured your loan, refinancing could lower your monthly payments.​
• Downsize Your Home: Moving to a smaller, more affordable residence can reduce housing expenses.​
• Reduce Transportation Costs: If you own multiple vehicles, consider selling one. When replacing a vehicle, opt for a reliable used car to minimize expenses.​
• Utilize Home Equity: Accessing your home’s equity through a second mortgage or home equity line of credit can provide funds to pay off higher-interest debts.​
• Consolidate Debt: Transfer high-interest credit card balances to cards with lower interest rates and consider closing unnecessary accounts.​
• Review Insurance Needs: Assess your insurance policies to ensure they align with your current needs, potentially uncovering opportunities for savings.​
• Cut Discretionary Spending: Reducing expenses such as dining out can free up funds for savings.​

By implementing these measures and directing the savings into retirement accounts like IRAs or 401(k)s, you can take advantage of tax-deferred growth, enhancing your financial position over time.

Reallocate Your Assets: Consider Investing More Aggressively

While conservative investments may feel safer, they might not yield the growth necessary to outpace inflation and support a lengthy retirement. Evaluating your risk tolerance and time horizon is crucial:

• Longer Time Horizon: If retirement is several years away, allocating more assets to growth-oriented investments could be beneficial.​
• Near or In Retirement: Even during retirement, maintaining some growth investments can help sustain your portfolio’s longevity.​

Regularly rebalancing your portfolio ensures it aligns with your evolving financial goals and risk tolerance. Consulting a financial professional can provide personalized guidance tailored to your situation.

Accept Reality: Adjust Your Standard of Living

If a significant retirement income gap is unavoidable or retirement is imminent, reassessing your retirement lifestyle expectations may be necessary. Fortunately, certain expenses often decrease in retirement, such as:

• Housing Costs: Mortgages may be paid off, or downsizing can reduce expenses.​
• Transportation Expenses: Commuting costs typically decline after leaving the workforce.​

However, it’s important to anticipate potential increases in healthcare costs. Developing a realistic budget that reflects your anticipated retirement lifestyle can help manage your finances effectively. Being mindful of spending, especially in the early years of retirement, is crucial to ensure long-term financial stability.

Making the Most of Your Retirement Plan

Proactively planning for retirement is essential to address potential retirement income gaps and achieve your desired lifestyle. Starting early allows more time to build savings and adjust strategies as needed. Collaborating with a financial advisor can provide valuable insights and help you navigate complex decisions, ensuring your retirement plan aligns with your goals and circumstances.

At Navalign Wealth Partners, we’re committed to guiding you through these decisions. If you have questions or need assistance with your retirement planning, don’t hesitate to reach out. Contact us today to start the conversation and secure your financial future.