You’ve worked hard your whole life to enjoy retirement. Once you enter that phase, the goal is to make sure your money lasts as long as you do. To combat this, here are some things you can do to drastically increase the odds that you won’t run out of money.
Create a Realistic Spend-Down Rate
Consider withdrawing 4% of your balanced portfolio in year one, then increasing the amount each year by the rate of inflation.
Have a Backup Plan
Investing is uncertain, and things may not go as planned. Look at your expenses and decide what’s nondiscretionary (taxes, utilities, food, insurance) and what’s discretionary (travel, entertainment). Then examine those discretionary items and decide how much you could reduce should markets drop and not quickly recover.
From a lifestyle standpoint, it’s hard to go from decades of working full time to having no routine at all. From a financial standpoint, working part-time accomplishes two financial goals: it brings in cash and gives you less time to spend money. Remember, life in retirement is more than a 20+ year vacation. Finding work that you enjoy not only puts more money in your pocket, but gives you a reason for getting up in the morning and being out in the world.
Delay Taking Social Security
If you can delay taking Social Security benefits by four years, you can increase your monthly check by 32%. For example, a 66-year-old could get $2,000 a month if she elected to start taking Social Security payments now. What she is really doing is taking a payment that could be $640 higher each month if she waits until age 70. Each year, your payment gets adjusted higher for inflation. Higher guaranteed inflation-adjusted income reduces the odds of running out of money. Delaying SS is still a good idea even if you believe there will be reductions in the future. That’s because you still receive a percentage of a bigger number.
Be Frugal, Spend Strategically
Focus on ways to save. For instance, buying a modest car and keeping it for a decade or longer is the single biggest way to save. Downsizing the house can save a bundle, too. Also, getting insurance quotes every couple of years may not only save you significant cash but can also make sure you are insuring only what you can’t afford to lose. Finally, put the Internet to work for you when it comes to comparing prices, getting discounts, and last-minute deals.
Keeping Investment Discipline High
In investing, we must do more work to get feedback, such as looking up the fund fees. Lower fees typically yield greater returns, and that gives you more money to spend. There is always the possibility that when the next bear market strikes, you will panic and sell a low-cost fund. That’s where having the discipline to stick to an asset allocation is critical.
By taking these steps, you’ll be far more likely to fund the rest of your life. Then you can concentrate on whatever brings you meaning and happiness.
Investment Advisory Services offered through Sound Income Strategies, LLC, an SEC Registered Investment Advisory Firm. The Retirement Income Store® , LLC and Sound Income Strategies, LLC are associated entities.