Are you afraid of running out of money in retirement? With people living longer than ever before, it’s a valid concern.
Having a long and healthy life is a fantastic thing. Your time in retirement should be spent enjoying it and not worrying about whether or not your assets will last. Here are five strategies that can help you alleviate your fears.
1. Set up and follow a budget
You may know that you should be socking away more before you retire but don’t see where it can possibly come from. If you are in a position where it seems as if you have no excess money that you can save, try setting up a budget.
2. Save more money before retiring
The more money you can accumulate before retiring, the less likely you will run out of money. If you are not maxing out a retirement account like a 401k or IRA, consider giving these accounts a boost with the extra money you’ve identified that you can save from your budget. Adding money to these accounts could potentially give you tax savings and will grow tax-deferred. Once you reach the age of 50, you can also contribute $1,000 more to an IRA each year and $6,500 more to a 401k each year in the form of a catch-up provision.
3. Continue investing for growth
Individuals age 85 and older are the fastest-growing age segment in the United States.. This means that if you retire at age 65, it’s possible you could live far longer than 20 years in retirement!
4. Create multiple income streams
As long as you qualify for Social Security, you will be eligible for income benefits as early as 62 years old. But Social Security will probably only replace about 40% of your income, and many experts agree that you should replace at least 80% of your pre-retirement income.
5. Consider working part-time
Even after doing all of this, it’s possible that you won’t have enough money for covering your expenses in retirement. If this is the case, think about working longer. As much as you may dread this, it’s important that you remember that work in retirement can be redefined. After you retire, you only need to work enough to supplement the other income sources that you have.
Imagine that you make $75,000 while working. If you plan on replacing 80% of that, you’ll need $60,000 in income each year. If Social Security replaces 40% of your pre-retirement income, or $30,000, your other income sources, including part-time work, should replace the other $30,000. You can potentially do this working part-time.
Drastically simplifying your lifestyle and living on a fixed income probably doesn’t fit into your retirement plans. Running out of money is something that plagues many retirees and is a cause for concern but can be completely avoided. With some careful planning, your many years of working hard can pay off, and you can live your life to the fullest in retirement.
View more information: https://www.fool.com/investing/2021/01/26/5-strategies-avoid-running-out-of-money-retirement/