If you’re worried about running out of money in retirement, you’re not alone. Most people can’t or don’t want to go back to work once they retire, so it’s important to manage your spending and hope that your investments will take care of themselves.
Many of these planning tips can help you increase your retirement funds. Here are his six suggestions.
Build a diverse mix of income sources and assets
A common rule of thumb is that retirees should rely on three sources of income: Social Security, pensions, and savings. However, only 7% of retirees had access to all three components at some point. 2020 Survey by National Institute for Retirement Security, while Social Security was the only source of income for 40% of them. “Social Security alone is not considered sufficient for a secure retirement, and Social Security is not intended to be operated in isolation,” the group said.
Ideally, retirees would be able to draw from multiple buckets, said Jenna Biancavilla, wealth advisor and principal at Pearl Capital Management in Phoenix. These buckets can range from liquid savings accounts to long-term investments in retirement accounts, including Social Security, pensions if available, perhaps annuities, and income from rental properties or part-time jobs, etc. Complemented by other assets.
Minimize debt and stick to your budget
It’s not necessarily a bad thing to have some debt after retirement (for example, a mortgage from the past few years or a small car loan balance), but be careful not to go overboard. Loans involve obligations that you may not be able to meet.
The Center for Retirement Research at Boston University found that roughly two out of three Americans have some kind of debt in retirement, and that percentage is rising. “But much of this growth is being driven by increased mortgage debt.” The group said in a recent report:added that many homeowners have benefited from refinancing at lower interest rates in recent years.
Either way, being in debt after retirement highlights the need to stay reasonably close to a budget, even though many people fail to do so.
Plan carefully for RMDs
If you’ve been diligently investing in a retirement account for years, you may have a sizable nest egg. The flip side is that when you withdraw money from a traditional individual retirement account or your workplace’s 401(k)-style plan, you’ll eventually have to pay taxes. However, you can still afford to plan your withdrawals to minimize taxes.
For example, if you start making withdrawals after you stop working but before you claim Social Security, you may fall into a lower tax bracket than if you had to add your RMD withdrawals to your Social Security benefits and possibly your employment income. will be higher.
RMD Generally begins at age 73. Biancavilla suggests developing a withdrawal strategy about 10 years before you start withdrawing funds.
Minimize family and other financial obligations
If you’re worried about how you’ll make ends meet after retirement, avoid giving subsidies to your children, grandchildren, or friends. However, if you feel you need to provide financial assistance, it may be best to provide cash assistance when you can, rather than co-signing a loan that could potentially lock you in for years, for example. not.
Helping relatives with housing is a particularly difficult area. For example, if you own a rental property, it might be best to avoid it, Biancavilla suggests.
“I would much rather help them cover their rent or help them buy a home on their own,” she said. “Don’t put them in a rental property (without charging rent). They’re family and you’ll never kick them out.”
withdraw money at a modest rate
One of the most difficult parts of retirement planning is deciding how much to spend each year on your savings and investments. You don’t know how well your investments will perform in the future, if you will have unexpected expenses, or how long you will live.
That said, withdrawing about 4% per year is a “proven” strategy that makes sense for people who start withdrawing at the traditional retirement age of around 65, but for adults looking to retire. That percentage may be too high, Biancavilla said. At a young age.
investment research company Morningstar; In a recent paperlists 4% as a reasonably safe withdrawal rate for retirees who own a balanced investment portfolio and want their money to have a good chance of lasting about 30 years.
Consider adding medical protection
Everyone may need basic non-Medicare health insurance after retirement. Other options include Medicare Advantage plans and long-term care insurance.
“Medicare does not cover long-term care costs such as those incurred in nursing homes,” Terry Turner, financial wellness facilitator at RetireGuide.com, said in a comment. “It may be beneficial to consider long-term care insurance or a pension with a long-term care rider,” he added.
However, Biancavilla believes that long-term care insurance is relatively expensive given the potential benefits. As an alternative, she suggests saving for long-term care in a separate account that you can tap into if needed, or keep it if you can’t afford it.
“You can pay $50,000 in (insurance) premiums over time, or you can put $50,000 in a savings account” for long-term needs, she said. But for this strategy to work, you need the discipline to save that money. This is not easy.
Contact the author at russ.wiles@arizonarepublic.com.