The famed ‘Shark Tank’ investor highlights key steps toward a more secure retirement.
Millions of workers across the United States strive to cover monthly bills, often questioning how much they should set aside for future needs. Kevin O’Leary, known for his candid advice and role as a prominent investor on ABC’s “Shark Tank,” urges Americans to acknowledge that Social Security alone will not cover all retirement expenses.
Under the federal program, the average monthly benefit hovers around $1,900, translating to roughly $23,000 per year. O’Leary points out that these amounts fall short of most retirees’ desired income levels, so he strongly advises individuals to look beyond standard checks. Many employees already do so by contributing to employer-sponsored 401(k) plans or exploring IRAs, aiming to bridge the gap between their projected living costs and government-issued benefits.
Why Kevin O’Leary insists retirement plans must go beyond monthly federal benefits
Saving through 401(k) plans or IRAs is a popular choice among future retirees, and O’Leary emphasizes that each option has distinct tax implications. Traditional IRA contributions use pre-tax dollars, so withdrawals in retirement will be taxed. Roth IRAs, on the other hand, involve paying taxes when contributing, allowing tax-free withdrawals later.
Ever wondered if you can truly retire on just one source of income? O’Leary’s perspective is clear: Social Security recipients are at risk of financial strain if they expect government checks to cover all expenses. He recommends scaling back on unnecessary spending long before retirement begins.
Kevin O’Leary shares blunt tips for trimming expenses before collecting benefits
In his book, Cold Hard Truth for Men, Women & Money, the ‘Shark Tank’ entrepreneur encourages soon-to-be retirees to downsize their homes and eliminate extras like second cars or premium cable subscriptions. O’Leary also highlights the benefits of staying physically active, suggesting that biking or walking can control costs and promote health.
He estimates that boosting annual income by just $5,000 can add up to $75,000 over 15 years, an amount that can make all the difference. To reach this goal, O’Leary advises adopting frugal habits early, potentially rooming with a friend or family member, and diligently scrutinizing monthly bills. Below is a quick list of O’Leary’s cost-cutting suggestions:
- Downsize housing to reduce mortgage or rent payments
- Share expenses like utilities, groceries, or transportation
- Avoid pricey entertainment packages and unused subscriptions
- Plan for healthcare costs through solid insurance coverage
How much income should you aim for during retirement alongside Social Security?
Financial experts often recommend covering around 65% of your pre-retirement income. For instance, if you earned $100,000 annually, you might need about $65,000 in your first retirement year. With the federal program typically contributing around $23,000, you would want an additional $42,000 from other sources. A small table can illustrate this estimate:
| Annual Pre-Retirement Income | Approximate 65% Goal | Typical Federal Benefit | Additional Needed |
|---|---|---|---|
| $100,000 | $65,000 | $23,000 | $42,000 |
O’Leary notes that retirees often discover reduced expenses once they stop working full-time, thanks to fewer commuting, dining, and wardrobe costs. “If you’re healthy and happy,” he explains, “retirement can be far less expensive, but it takes planning.”
In conclusion, O’Leary encourages beneficiaries to start saving early, adopt frugal habits, and diversify beyond monthly checks. These measures can create a more comfortable retirement and ensure you make the most of your golden years.