Running out of money has long been a major fear among retirees. And the sad reality is that it doesn’t matter whether you end your career with $400,000 saved or $4 million.
No matter how much money you have, you might panic every time you withdraw money. IRA or 401(k) plan. But if you take these important actions, you may be less likely to completely deplete your savings during your lifetime.
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1. Establish a safe withdrawal rate
If you tap into your IRA or 401(k) whenever you need money, you run the risk of depleting your funds sooner than you expected. Therefore, plan your withdrawals instead of making them randomly.
Speak with a financial advisor to find a safe withdrawal rate based on factors such as your savings balance, investment mix, and life expectancy. Obviously, you can’t predict with complete accuracy how long you’ll live. However, you can make educated guesses based on your health and family history.
From there, calculate a reasonable withdrawal rate and set a schedule so you know exactly when to tap your nest egg. Sure, you can work with your advisor to make withdrawals at a time that makes sense from a market perspective, but it can get a little complicated. Therefore, it may be better to make a schedule from the beginning.
2. Delay your Social Security filing
you are entitled to full Social Security benefits based on your individual wage history. full retirement age (FRA), age dependent on year of birth. However, if you delay filing past FRA, you can increase your monthly benefits by 8% annually if you hold off filing until age 70.
more money comes in from social security There is no automatic guarantee that your savings will not be depleted. But think about it this way. Assume that by delaying his claim for two years beyond FRA, he can increase his $2,000 monthly Social Security benefit to $2,320. If she brings in an additional $3,840 a year, she won’t have to take that $3,840 out of her savings. It’s that simple.
3. Consider your pension
An annuity is a contract with an insurance company that deposits money with you in exchange for a series of payments. Some annuities guarantee regular payments for the rest of your life. So it’s one way to avoid completely losing your income when your savings start to dwindle.
However, pensions also have drawbacks. They can be expensive to implement from a fee perspective, and many are designed to pay a fixed amount to the recipient until retirement, regardless of inflation.
Social Security, by contrast, is set to at least adjust for increases in the cost of living. Still, if the thought of running out of money keeps you up at night, it’s an option worth considering.
After working hard all your life, you don’t deserve to struggle financially in retirement. If you’re worried you’ll run out of savings and meet exactly that fate, take these steps to avoid that scenario.
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