Financial instability is the number five biggest worry for Americans, according to a survey, which was only topped by serious health issues. You’ve spent years building up a nest egg; don’t let your funds dry up quickly after you retire! Here are a few ways to help you stay on track and make your savings last after retirement.
Outline a budget
Create a budget for retirement before you retire and try it out to see if it is a realistic target. Have defined guidelines in place but remain flexible. If you have the room, withdraw less from your account in some years so that you can spend more in other years, when needed. This may also help to provide a cushion for unplanned medical expenses. Your spending needs may fluctuate depending on emergencies and large purchases such as a car or vacation.
The 4% rule
Be methodical when it comes to withdrawing from your retirement account. The 4% rule, or benchmark, was developed in 1994 by William Bengen. Instead of taking 4%, you could withdraw between 3-5% of your total savings during the first year of retirement. For years to come, adjust this amount up or down, according to the market and any unexpected expenses. 4% is a starting point; take time to consider your asset mix and how long you need your savings to last. This will help you make an educated decision.
To help avoid a shortfall and prevent the risk of running out of money during retirement, delay your retirement date or supplement with a paycheck from part-time employment. If you work for a longer period of time, you will have more income rolling in and it could be less likely your money will run out. Speak with a financial advisor to discuss if it could be beneficial to wait a few more years to retire.
Delay Social Security
If you plan on using Social Security for a considerable amount of your retirement income, you might want to consider delaying it. It could be beneficial to delay the benefits of Social Security until you turn 70 years old. From 66-70 years old, you earn 8% per year in delayed retirement credits.
Planning for retirement is only part of the puzzle when it comes to security after you retire. Remain cognizant of your spending and supplement when needed. Reach out to a trusted financial advisor for help regarding finances and retirement.
We are an independent firm helping individuals create retirement strategies using a variety of insurance and investment products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial advice. All investments are subject to risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Any references to protection benefits, safety, security, or lifetime income generally refer to fixed insurance products, never securities or investment products. Insurance and annuity product guarantees are backed by the financial strength and claims-paying ability of the issuing insurance company.
The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions.
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