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Closing the Gap

When you determine how much income you’ll need in retirement, you may base your projection on the lifestyle that you plan to have and when you want to retire. However, as you grow closer to retirement, you may discover that your retirement income won’t meet your needs. So what do you do then?

If you find yourself in the situation where you will not have sufficient funds by when you wish to retire to  the lifestyle that you’d planned, you’ll need to bridge this projected income gap. There are several approaches that you may consider—and the sooner, the better.

Delay retirement: 65 is just a number

One way of dealing with a projected income shortfall is to stay in the workforce longer than you had planned. This will allow you to continue supporting yourself with a salary rather than dipping into your retirement savings. Depending on your income, this could also increase your Social Security retirement benefit. You’ll also be able to delay taking your Social Security benefit or distributions from retirement accounts.

At normal retirement age (which varies, depending on the year you were born), you can receive your full Social Security retirement benefit. Or, you can elect to receive your Social Security retirement benefit as early as age 62, which means that your benefit will be reduced. Or conversely, you can delay retirement and postpone your benefit, thereby increasing your Social Security benefit.

If you are under normal retirement age and take Social Security while working, that income may decrease the amount of Social Security retirement benefit you receive by $1 for every $2 you earn over an earnings limit. However, once you reach normal retirement age, you can earn as much as you want without affecting your Social Security retirement benefit.

Another advantage of delaying retirement is that you can continue to build tax-deferred funds in your IRA or employer-sponsored retirement plan. Keep in mind, though, that you may be required to start taking minimum distributions from your qualified retirement plan or traditional IRA once you reach age 70½, if you want to avoid harsh penalties. (Note: The CARES and SECURE acts passed in 2020 may allow you to delay minimum distributions).

Spend less, save more

You may be able to deal with a projected retirement income shortfall by adjusting your spending habits now. If you’re years away from retirement, you may be able to make minor changes; however, if retirement is just around the corner, you may need to drastically change your spending and saving habits. Saving even a little money can really add up when you do it consistently and earn a reasonable rate of return. Make permanent changes to your spending habits and you’ll find that your savings will last even longer. Start by preparing a budget to see where your money is going. Here are some suggested ways to stretch your retirement dollars:

  • Refinance your home mortgage if interest rates have dropped since you took the loan.
  • Reduce your housing expenses by moving to a less expensive home or apartment.
  • Sell one of your cars if you have two. When your remaining car needs to be replaced, consider buying a used one.
  • Access the equity in your home. Use the proceeds from a second mortgage or home equity line of credit to pay off higher-interest-rate debts.
  • Transfer credit card balances from higher-interest cards to a low- or no-interest card, and then cancel the old accounts.
  • Ask about insurance discounts and review your insurance needs (e.g., your need for life insurance may have lessened).
  • Reduce discretionary expenses such as eating out and entertainment.

Earmark the money you save for retirement and invest it immediately. If you can take advantage of an IRA, 401(k), or other tax-deferred retirement plan, do it. Funds invested in a tax-deferred account will generally grow more rapidly than funds invested in a non-tax-deferred account.

Reallocate your assets: consider investing more aggressively

Some people make the mistake of investing too conservatively to achieve their retirement goals. This is not surprising, because as you take on more risk, your potential for loss grows as well. But greater risk also generally entails greater reward. And with life expectancy rising and people retiring earlier, retirement funds need to last a long time.

If you are facing a projected income shortfall, consider shifting some assets to investments that have the potential to substantially outpace inflation. The amount of investment dollars which you should keep in growth-oriented investments depends on your time horizon until retirement or how long you need to save and your tolerance for risk. In general, the longer you have until retirement, the more aggressive you can afford to be. If you are at or near retirement, you may want to keep some of your funds in growth-oriented investments, even if you decide to keep the bulk of your funds in more conservative, fixed-income investments. Get advice from a financial professional if you need help deciding how your assets should be allocated.

And remember, no matter how you decide to allocate your money, rebalance your portfolio now and again. Your needs and your investment returns will change over time, and so should your investment strategy.

Accept reality: lower your standard of living

If your projected income shortfall is severe enough or if you are already near retirement, you may realize that no matter what measures you take, you will not be able to afford the retirement lifestyle you desire. In other words, you will have to lower your expectations and accept a lower standard of living.

Fortunately, this may be easier to do than when you were younger. Although some expenses like healthcare generally increase in retirement, other expenses, like housing costs and automobile expenses, tend to decrease and school tuition and family expenses are eliminated.

Once you are within a few years of retirement, prepare a realistic budget to help you manage your money in retirement. Think long term: retirees frequently get into budget trouble in the early years of retirement when they are adjusting to their new lifestyles. When you are retired, every day is Saturday, so it can be easy to overspend.

The AIA Trust is here to help

The AIA Trust offers retirement savings plans and distribution options through Equitable Financial Life Insurance Company (Equitable Financial) to assist you in achieving your retirement goals. Plans can be established for one-person firms (or components)—or for many employees—utilizing a variety of retirement savings and distribution vehicles. Equitable Financial can assist you toward achieving your goals based on over 50* years of experience working with association members and over 25 years with AIA architects. Equitable Financial can help you review your options and offer you choices that can help alleviate the burden of establishing and managing a retirement savings plan. It’s one of the ways that the AIA Trust makes it easier for you to focus on doing what you do best: architecture.

Call (800) 523 1125 to speak with a Retirement Program Specialist or learn how you can start saving.


The AIA Trust endorses retirement savings and distribution plan products through Equitable Financial that can assist you toward achieving your retirement goals. With over 50 years of experience working with AIA members, Equitable Financial Retirement Program Specialists are licensed to provide the knowledge and resources to assist you and your team evaluate the plan options most suited for your personal retirement goals. In addition, Equitable Financial provides a full range of recordkeeping and plan administration services to complement its suite of retirement product offerings for AIA members and employees. For additional information on these AIA-endorsed member benefits, please call Equitable Financial at (800) 523 1125 or visit mrp.equitable.com/ps/partners/partner-aia.cfm 

This article has been written for general information purposes only. This material does not constitute an offer or solicitation of any kind and is not intended, and should not be relied upon, as investment, tax, legal, or financial advice or services.

The Members Retirement Program is funded by a group variable annuity contract issued and distributed by Equitable Financial Life Insurance Company (Equitable Financial) NY, NY. Annuities have limitations and restrictions. For costs and complete details contact a Retirement Program Specialist. Equitable Financial and its affiliates do not provide tax or legal advice. You should consult with your attorney and/or tax advisor before purchasing a contract.

* This reference applies exclusively to Equitable Financial Life Insurance Company.

Equitable is the brand name of the retirement and protection subsidiaries of Equitable Holdings, Inc., including Equitable Financial Life Insurance Company (Equitable Financial) (NY, NY), Equitable Financial Life Insurance Company of America (Equitable America), an AZ stock company with main administrative headquarters in Jersey City, NJ, and Equitable Distributors, LLC.  Equitable Advisors is the brand name of Equitable Advisors, LLC (member FINRA, SIPC) (Equitable Financial Advisors in MI and TN). GE- 3244123 (9/20)(Exp.9/22)

IMPORTANT DISCLOSURES

Broadridge Investor Communication Solutions, Inc. does not provide investment, tax, or legal advice. The information presented here is not specific to any individual’s personal circumstances.

To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.




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