By Boyce F. Lowery, CLU, ChFC
Have you ever worried that your money might not last as long as you do in retirement? If so, you’re not alone. That is the biggest concern for 49% of Americans regarding retirement. (1) With increased longevity and fewer companies offering traditional pensions, it is a valid concern. Instead of worrying about running out of money, though, you should take action to ensure that it won’t happen. Here are some things that you can do to help make sure you don’t outlive your money.
1. Create a Budget
The first step when creating a budget is to put down on paper where your money is coming from and where it is going. Many people have an idea about their cash flow situation in their head but haven’t taken the time to write it out.
It’s important to write out your budget in order to test the accuracy of your ideas with math. Oftentimes, once you write everything out, you realize that you were spending more than you thought. The knowledge of your true spending habits and the visual aid of having it in writing can help curtail spending and cause you to be more intentional with your cash flow.
2. Plan for a Long Life
While planning your monthly cash flow is important, it’s also helpful to put some thought into your overall retirement. Having a plan for how you will fund your retirement with the resources available to you will help you live within your means and give you peace of mind.
One of the biggest mistakes people make when planning their retirement is underestimating how long it will last. As you plan, plan for a long life. While you may not expect to live past 85, you should develop your plan as if you were going to live until 90 or 95. If you’re going to err, try to err on the conservative side. It’s better to leave an inheritance than to outlive your money.
3. Consider Working
Many retirees end up working during their retirement, whether they have a part-time job, do consulting work, or start their own small business. Working will definitely allow your retirement savings to stretch further, but there are many other benefits as well. You may enjoy working for the benefits of social interaction, the ability to make a difference in the lives of others, the intellectual stimulation, or just the joy of having responsibility.
4. Maximize Social Security Benefits
Social Security benefits have become a significant source of income for many retirees as fewer and fewer companies offer traditional pensions. As such, it is important to strategically maximize benefits. Your Social Security benefit amount will vary depending on when you begin receiving benefits and also how you coordinate claiming benefits with your spouse. A knowledgeable financial advisor can help you analyze your situation to determine the best way to maximize your benefits.
5. Minimize Taxable Income
Another way to make your money go further in retirement is to minimize your taxable income in order to reduce the taxes due on your Social Security benefits and minimize your Medicare Part B premiums. One way to do this is by limiting your earned income from work, but for most retirees, it is more effective to focus on creating tax-free income streams. There are a number of ways to generate tax-free income in retirement, from contributing to Roth accounts to investing in tax-free municipal bonds and life insurance.
6. Protect Against Inflation
Inflation is the slow erosion of the buying power of money. We all know that $100 today cannot buy what it could in 1980. That is due to inflation. Many retirees hold their money in very conservative investments or deposit accounts to avoid losing money in the stock market only to lose the purchasing power of their money to inflation. Since retirement can last over 30 years, it is important to take measures to protect your nest egg against inflation.
7. Don’t Sell Low
One of the basic rules of investing is to buy low and sell high and avoid doing it the other way around. However, if all of your nest egg is in market-based investments, you may be forced to do the opposite and sell low, as many retirees are experiencing right now. It is important for you to have alternatives in retirement so that you aren’t forced to make withdrawals from market-based investments during down markets.
8. Be Properly Insured
Having proper insurance in place, such as health insurance and long-term disability insurance, is a defensive move that can protect your nest egg and enable it to last a very long retirement. Life insurance is also an important way to protect your spouse and loved ones when you pass away, and can sometimes provide long-term care benefits as well.
How We Can Help
As you can see, there are a number of things you can do to help calm your worries about outliving your money in retirement. If you have any questions about how to take action on these ideas or if you want professional help in developing a plan for your retirement, call Suncrest Advisors at 888-827-0146 for a free and confidential consultation.
Boyce Lowery is a 40-year veteran and established expert in the insurance industry. As the managing partner of Suncrest Advisors, he, his partner, and their associates all aim to provide financial security and peace of mind to business owners, executives and professionals, and high net-worth individuals across the United States. Along with more than four decades of experience, Boyce is a Chartered Life Underwriter® (the premier designation for insurance professionals signifying specialized knowledge in life insurance and estate planning) and a Chartered Financial Consultant® (known as the advanced financial planning designation). To learn more, visit https://suncrestadvisors.com/ or connect with Boyce on LinkedIn.