
Don’t have pension-envy. Here’s how you can retire without a pension. (pixabay.com)
A pension is a security blanket for retirees. Even if you weren’t a great saver during your working years, a pension will give you a monthly check, no matter what.
We know lots of our readers have pension-envy, and we can’t blame you.
But if you don’t have a job that offers a pension — and few besides government workers do — you’re going to have to plan.
Before you say, “No way, forget it, I’ll never retire,” or “I can’t afford to stop working,” we’re here to tell you you’re wrong.
Here’s an action plan to get you ready for retirement.

Saving doesn’t have to be painful. (pixabay.com)
No matter how tight money is, you can take small steps to build your nest egg without dramatically changing your lifestyle.
Start by looking at your employer’s retirement plan, such as a 401(k).
A 401(k) allows you to save in an account that will grow tax-deferred, meaning you won’t owe taxes on your earnings until you withdraw the money.
Just as important, your contributions will lower your taxable income every year. If you earn $50,000 and save $5,000 to a 401(k), you’ll only be taxed on $45,000 of income.
Try this calculator to see how your take-home pay would change if you contribute to a 401(k).
Make sure you don’t miss out on free money. Many employers also offer so-called “matching funds.” For example, your employer might add $1 for every $1 you save up to a certain limit.
If you don’t have a 401(k), you can open an IRA. Traditional IRAs also have the benefit of tax-deferred growth and lowering your taxable income (if you qualify).
Another option is a Roth IRA, but that won’t help your tax bill today.
You could also establish automatic savings to a regular bank account, but the account will probably earn little interest and more importantly, you might be tempted to raid the account for non-retirement expenses. Don’t do it.

Make savings easy by having money taken from your paycheck or bank account each month. (pixabay.com)
Whatever kind of retirement account you choose, you can arrange to have funds go to the account automatically.
Your 401(k) contributions will come directly from your paycheck, so you don’t have to worry about sending money after you set up the account.
With an IRA, you can ask the investment company to take money directly from your checking account every month.
Both options put your savings plan on auto-pilot.

You can find extra money in your budget. (pixabay.com)
You may think you can’t afford it, but you can. Really, you can.
Take a look at your current budget and where your money goes. You can probably find ways to cut back your spending just enough to redirect a few bucks to a retirement account.
For example, let’s say you go to Wawa every day before work, five days a week, 52 weeks a year. You spend $5 each time for your coffee and breakfast sandwich. That adds up to $1,300 a year.
If you instead make your own coffee and invest the $1,300, it would be worth nearly $18,000 in 10 years assuming you earned an average of 7 percent on your investment. And that doesn’t count any employer matching funds.
That’s not enough to retire on, but it’s a nice trade-off for skipping coffee. It’s a good start.

Think about all the items you pay for that you don’t really use or need. (pixabay.com)
There are plenty of other ways to cut your spending. Ask yourself:
Do you really need cable television if you spend all your time with Netflix?
Do you pay for subscription services you don’t often use?
Do you clip coupons and compare prices before you buy?
Do the adults in your family really need to give each other large gifts for birthdays and holidays?
Think of all your other unnecessary expenses and see where you can cut back. It adds up.
Another $25 a month to invest, earning an average of 7 percent a year, would give you another $4,100 in 10 years. In 20 years, it would be worth nearly $13,000.
If you can scrimp together another $100 a month, it could be worth $16,500 in 10 years, or $49,000 over 20 years.
There are other ways to turbo-boost your savings so you can increase your retirement contributions over time.
One idea is to put your tax refund into an IRA every time.
Or each time you get a raise, increase your 401(k) savings by that amount. Do the same for bonuses.
Or if you finish paying off a car loan, keep paying the same amount each month, but this time, write a check to your retirement savings account. You’re already used to living without that cash, so put it to good use.

Don’t pay more in interest than you have to. (pixabay.com)
Next, take a look at how you borrow money.
There’s a good chance you can take steps to cut back interest payments.
Consider refinancing your mortgage and put however much you save each month into a retirement account.
Or if you have high interest credit cards, shop around for lower rates or balance transfer offers with low introductory rates.
Even better, consider paying them off with a home equity line of credit (HELOC), which will certainly have a lower rate than most credit cards. If you do that, just make sure you don’t start charging on your cards again.
Whatever you do, don’t spend money you don’t have. If you can’t afford to pay cash, wait to make a purchase.
You don’t want debt hanging over your head in retirement.

You may need less than you need for retirement. (pixabay.com)
There’s no magic number for how much you’re going to need in retirement.
It’s not what you save, but what you plan to spend.
That means it’s time to create a mock retirement budget in which you consider what will change when you stop working.
No more bus or train tickets, no commuting costs, no tolls.
No more office clothing, shoes, dry cleaning bills.
No more daily Wawa breakfast trips and catching dinner on the fly because you don’t have time to prepare a meal.
Those are just some of the expenses that will mostly vanish, or be drastically reduced, when you stop working.
Do be cautious and realistic with the budget because some expenses may actually rise in retirement.
If you don’t yet qualify for Medicare, you’ll have to consider health insurance costs.
And because you’ll have more free time, you may go out and spend more on restaurants, travel and hobbies that you finally have time for.
Just keep potential higher costs in mind for your spending plan.

A little extra income may be all you need. (pixabay.com)
Now it’s time to run the numbers and compare the budget to your anticipated retirement income and see where you land.
If you do the math and have a large anticipated shortfall, and you think you won’t have enough time to save enough, let’s go through your options.
Let’s say after considering your retirement income from investments and Social Security, your budget shortfall is $40,000 a year. There are other ways to find that money.
First, consider part-time work. No one says you have to stay in your current job and handle the stress that comes with it.
Instead, consider a part-time job doing something you love. (Think a home improvement store if you’re handy and you like to build things, a flower shop if you have a green thumb, a coffee shop if you savor those roasted beans — you get the idea.) It might just pay enough to make up your shortfall.

Take advantage of your youth and health while you can. (pixabay.com)
Working part-time might seem distasteful, but realize you may not have to work forever.
You don’t want to retire too young, only to realize in your older years that you can’t afford it. Working part-time at 65 is a lot different from working part-time at 80. Perhaps you’d be healthy enough, but if a medical condition interferes with your ability to work, you could be in trouble.
Plus, the longer you work, the more time you have to save. You may be able to minimize the need to withdraw funds from your retirement accounts. Then your money will keep on growing.

A home sale could mean an infusion for your retirement accounts and cash flow. (pixabay.com)
Another strategy to help your retirement budget is to reevaluate housing.
Many soon-to-be retirees are empty nesters. They have a bigger home than they need now that the kids have grown.
Downsizing can save you money in several ways.
First, if you find a smaller home or a condo for less than your current home is worth, you can take the difference and invest it in your retirement accounts. That could be a big boost to your nest egg.
The move would also lower your monthly bills, perhaps eliminating your mortgage payment and other expenses, such as lawn care and snow removal.
Also, a smaller home will also mean smaller utility bills, so that’s another way to save.
Best of all, your property tax bill could also shrink if you choose your new community carefully.
Retirement could change a few things for your tax bill, saving you even more money.
If you have a smaller income in retirement, you could be in a lower tax bracket.
Plus, on your New Jersey return, Social Security benefits are not taxable. More savings.
Then New Jersey has expanded its pension exclusion — the amount of retirement income a taxpayer can keep free of tax.
For 2018, $60,000 of income would be free of tax if you qualify. That number will rise to $100,000 by 2020. You can learn more about that here and here.
There’s also the Senior Freeze, which can save you a little on property taxes, plus there are a couple of tax breaks for veterans.
Nice benefits if you qualify, but they aren’t much compared to what other states offer retirees.

Another state may treat you better in retirement. (pixabay.com)
Let’s be honest: New Jersey is one of the most expensive states for retirees.
The cost of living. The property taxes. You know the drill.
So instead, consider moving to a lower-cost state. We’ll miss you, but you may get a lot more for your money somewhere else.
Here’s a look at some tax-friendly states for retirees. Also, consider these items before you make a move.