When the market goes erratic, it’s only natural for people who are close to retirement or already in retirement to get anxious. It then boils down to one single question. Do my retirement accounts have sufficient funds to last through your retirement?
It’s brutal, isn’t it? You invest in 401(k) plans and IRAs to build up your nest egg only to see it destroyed with one market gyration.
It’s heart-wrenching to see people who have planned for a financially secure retirement ending up losing their assets due to unforeseen market fluctuations or events.
Some of the unforeseen or unknown events that can affect your retirement funds are:
- Your life expectancy
- Inflation rates
- Healthcare costs
- Investment risks
How To Make The Money Last In Retirement
There are ways you can stretch your retirement savings for almost as long as the years in which you accumulated those investments. Follow the below five steps to make your money last in your retirement.
- Figure out When You Want to Retire
While 65 years is the retirement age, a survey by Willis Towers Watson says that nearly one in five Americans work beyond age 70. Delaying retirement has several benefits:
- It gives you the opportunity to save more for retirement and continue investing in your employer retirement accounts like 401(k).
- It helps you to delay withdrawing from your retirement savings.
- You can also take benefit of the employer’s health insurance coverage.
- It helps you to reduce your overall debt, such as credit card debt, and even your mortgage.
- Consider Working Part-Time
If for whatever reason you can’t work full-time during your retirement years, you can earn income from a part-time job.
Working part-time not only helps you financially but also keeps you physically and mentally active. However, you need to keep your skills up-to-date to be employable.
- Tap in Social Security Benefits at the Right Time
If you want to stretch your retirement funds, don’t claim your Social Security benefits as yet. Delaying it can provide a long-term boost to your retirement funds.
A mistake most people make is that they start taking their benefits as soon as they step into retirement. The longer you wait, the better it is for your bottom line. Each year you delay claiming your benefits, they increase by 8% until age 70.
- Strategize Your Spending
The key to making your retirement fund stretch is to have a budget. Cover your fixed expenses with your Social Security benefits, an annuity or a pension. Try not to withdraw from 401(k), IRA or other retirement accounts for discretionary spending.
- Reduce spending if the market fluctuates.
- Schedule withdrawals strategically. You may want to take help from a financial advisor to help structure your withdrawals so that you minimize your tax bill.
If you don’t have a tax strategy, it can cause a substantial dent in your retirement savings and affects its longevity.
- Diversify Your Investments
Here are some tips on how you can diversify your investments
- Keep some cash as an emergency fund. So, if at all you face an emergency, you do not have to sell stocks at a loss when the market is low.
- Do not over-invest in the employer’s stock.
- Make sure you have a good mix of stocks, mutual funds, and fixed-income bonds.
- Consider keeping an annuity in your portfolio. It can provide guaranteed lifetime income for some, if not all your fixed expenses.
- Consider seeking help from a professional advisor if you’re unsure about your investment allocation.
Retirement planning is more than just saving. It is more about making your savings last long enough for you to have a long and comfortable retirement.
Are you ready to make your retirement savings last for long? Then, we need to talk. Call Self Directed Retirement Plans LLC today!
Rick Pendykoski is the owner of Self Directed Retirement Plans LLC, a retirement planning firm based in Goodyear, AZ. He brings over 30 years of diverse experience as a financial advisor. Rick takes great pride in giving honest and very experienced advice. Rick can readily converse with business owners and people looking to take control of their retirement accounts.