Do you worry about running out of money during your retirement years? If so, how can you help prevent this from happening?
In the first place, if you have this type of fear, you’re far from alone.
According to a study by Cerulli Associates, a financial services research organization, 58% of retirement savers from all age groups, including current retirees, say that outliving their assets is their greatest retirement fear.
This type of fear can certainly affect your quality of life when you retire. Still, there’s no need to panic – because you can take steps to help prevent the running-out-of-money scenario.
• Know how much you’ll need during retirement.
You need a clear picture, or at least as good an estimate as possible, of how much money you’ll need to support your retirement lifestyle. Once you do retire, some costs, such as transportation or other work-related expenses, might go down, while others – medical expenses, in particular – are likely to increase. The fear of running out of money, like many fears, stems largely from what you don’t know, so having a good sense of how much you’ll need in retirement can help reduce that anxiety.
• Build financial resources before retirement. You’re probably at your peak earning capacity in the years close to your retirement, so consider contributing as much as you can afford to your IRA and 401(k) or other employer-sponsored retirement plan.
• Maximize Social Security payments.
You can start collecting Social Security as early as 62 years old, but your monthly benefits will be larger if you can afford to wait until your full retirement age, between 66 and 67. (Payments will “max out” at age 70.)
• Re-enter the workforce. Going back to work in some capacity is one way to possibly help build retirement resources and delay taking Social Security. If you have a particular area of expertise, and you enjoyed the work you did, you might be able to go back to it on a parttime basis or do some consulting. You could boost your cash flow, and potentially extend your contributions to an IRA and to an employer’s retirement plan.
• Cut costs during retirement. Possibly the biggest cost-cutting measure is downsizing, such as moving to a less expensive area or scaling down your current living space? This can be an emotional as well as financial decision and downsizing isn’t for everyone, but it might be worth considering.
Among lesser ways of reducing expenses, take advantage of senior discounts for things like entertainment, public transportation, restaurants, and retail shopping, if available. And look for other opportunities, such as cutting out subscriptions or streaming services you don’t use.
• Look for more income from your investments.
As you get closer to retirement, and even after retirement, you may benefit from adjusting your investment portfolio to provide more income-producing opportunities. However, even as a retiree, you’ll want some growth potential in your investments to help keep you ahead of inflation.
-Contributed by Edward Jones