The average retiree doesn’t have nearly enough money in his retirement fund to make it all the way through retirement. Even above-average retirees often have trouble making ends meet at some point. So unless you’re independently wealthy with no worries except for who to leave your money to when you’re gone, you’ll probably want to stretch your retirement dollars as far as possible.
Most retirees have already paid off their mortgages, which substantially lowers their monthly expenses. But estimates of how much money you’ll need to retire on usually account for that, so don’t count on it to make too much of a difference.
Here is advice on things you can do to ensure that your retirement savings last as long as you need them to.
Keep working past retirement age. The longer you work, the more you’ll be able to save, and the higher your Social Security benefits will be. Once you’ve claimed benefits, however, pay attention to the earnings limit. If you go over it, your benefits will be reduced. It’s also important to remember that you must take minimum distributions from tax-deferred accounts by age 70 1/2, even if you’re still working.
Consider moving to a less expensive part of the country. You could sell your home and buy a comparable or smaller one in such an area for much less, giving you some extra cash to use in retirement. And since your expenses will be lower, the money you have will last much longer.
Take care of yourself. Retirees age 65 and over are eligible for Medicare, but Medicare doesn’t cover everything. Those who are in ill health can see their retirement savings diminish quickly due to out-of-pocket healthcare costs. Staying active, eating healthy and properly managing existing conditions will help minimize your medical expenses.
Consider investing in annuities. Immediate annuities are good for retirees, because they allow them to invest a lump sum and receive monthly payments for the rest of their lives starting at a later date. Deferred variable annuities are also good because there is a guaranteed minimum payout no matter how the investment performs.
Plan withdrawals from your retirement accounts carefully. You can save money by withdrawing money from taxable accounts and tax-free assets such as bond funds first. Withdrawals from tax-deferred accounts should be taken no sooner than age 70 ½. If you need the money before then, start with accounts made from after-tax contributions before you take money out of your IRA or 401(k). Your Roth IRA should be saved for last, since earnings are tax-free and there are no penalties for neglecting to take minimum withdrawals by a certain age.
It’s impossible to accurately predict how much money you’ll need for retirement, because you have no way of knowing how long your retirement will be. But if you do everything you can to stretch your retirement savings, the money you have will certainly last longer than it would otherwise.
Tags: retirement advice, retirement planning, retirement savings