Since there is no exact timeline on how long we will live or what our future may hold, it’s understandable to have questions and concerns about the road ahead.
Whether you are already retired or just beginning to consider your retirement years, the question "Will I outlive my money?" is most likely a top concern. Thankfully, there are multiple ways you can increase the odds that your finances will last as long as your retirement. Here are a few options to help your money last and work in your favor during these milestone years.
Have a Retirement Spending Plan
Similar to a budget in that it includes necessary or non-discretionary expenses, a spending plan also helps you organize your finances for activities such as traveling, shopping, or other forms of recreation. Having a plan that is well thought out and robust will help you establish the details of what you’d like to be able to afford during retirement. Working with a financial planner during this time can help you understand how to support the retirement you’ve always dreamed of.
Without a proper spending plan in place overspending can occur. This is a common occurrence during retirement years, and is similar to overspending in younger years, with the biggest difference being that many of us are unsure or aware of how to properly plan our income during that time.
For many choosing a withdrawal rate in retirement, 4 percent has historically been considered to be a good starting point. For example, if you saved a million dollars for retirement, the 4 percent rule would have you expecting to earn approximately $40,000 a year in income off your saved retirement dollars, not including any funds from Social Security.
However, it's actually important to determine what you expect your spending to be. It's possible that 4% will be too much, costing tax liabilities and losses from missed opportunities as investments are sold off too early. It's also possible that 4% may not be enough to cover expenses, in which it is important to find other sources of income or cut expenses.
Keep Earning
If you’re passionate about your career or enjoy helping others, you may benefit from waiting to retire for an extra year or two. Not only does staying involved increase your overall standard of living, but if you’re healthy enough and willing to continue working, your Social Security could end up being greater in your remaining years.
You may also want to consider transitioning out of the workforce slowly. If you’re in a position to take on less responsibility or work part time, you may find that continuing to work is less of a chore and beneficial in the long run. Even if you still want to retire from your career, that doesn't prevent you from taking a different job on a full- or part-time basis to continue earning an income, perhaps with less stress.
This will also allow your retirement assets more time to expand and strengthen. Encouraging your wealth to last throughout your retirement is easier to manage when you’re still earning and your finances don’t need to work as hard to last.
Protect Your Health
We all know that being sick can take a toll and is quite costly. Making healthier choices throughout our lifetime can help reduce the odds of suffering from conditions such as diabetes, high blood pressure, arthritis, or other chronic illnesses, in turn lowering healthcare expenses.
As we grow closer to retirement, it’s important to take into account that spending money on a healthy lifestyle, as well as receiving regular screenings and accurate medical care, can help improve quality of life. Spending a sufficient amount on preventative care now can be beneficial to lowering more costly expenses in the future.
Take Control of Your Savings
When it comes to funding your retirement, most Americans use a combination of Social Security, savings ,and pensions. It’s important to set yourself up for success and think outside of the box since these details may not always meet your expectations.
Keeping in mind the structure of your costs and the details of your income now as a pre-retiree will help you maintain your wealth in the long run and throughout your retirement. Remaining in control of your finances and always being aware of how much you’re spending will allow you to focus your time and energy on the experiences that matter most to you.
Escient Financial includes cash flow and budgeting as part of its Comprehensive Financial Planning service. There's even direct access to the financial planning software that includes a budgeting feature to incorporate a complete spending plan on the web and on a mobile app. Want to get started? Go ahead and...
This content is developed from sources believed to be providing accurate information. The information in this material is not intended as investment, tax, or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Digital assets and cryptocurrencies are highly volatile and could present an increased risk to an investors portfolio. The future of digital assets and cryptocurrencies is uncertain and highly speculative and should be considered only by investors willing and able to take on the risk and potentially endure substantial loss. Nothing in this content is to be considered advice to purchase or invest in digital assets or cryptocurrencies.
Enjoying Escient Financial’s Insights?
The weekly newsletter is usually delivered to your email inbox Friday or Saturday, and includes:
- the latest Escient Financial Insights articles
- a brief of the week's important news regarding the markets
- recommended third-party reads
- selected Picture of the Week
Escient Financial does NOT sell subscriber information. Your name, email address, and phone number will be kept private.
