How to Make Your Money Last in Retirement

Since there is no exact timeline on how long we will live or what our future may hold, it’s understandable to have questions and concerns about the road ahead. 

Whether you are already retired or just beginning to consider your retirement years, the question "Will I outlive my money" is most likely a top concern. Thankfully, there are several ways you can increase the odds your finances will last as long as your retirement chapter. Here are a few options to help your money last and work in your favor during these milestone years: 

Have a Retirement Spending Plan

Similar to a budget, a spending plan helps you organize your finances for activities such as traveling, shopping or other leisurely activities. Having a plan that is well thought out and robust will help you establish the details of what you’d like to be able to afford during retirement. Working with a financial planner during this time can help you understand how to support the retirement chapter you’ve always dreamt of. 

Without a proper spending plan in place overspending can occur. This is a common occurrence during retirement years, and is similar to overspending in younger years, with the biggest difference being that many of us are unsure or aware of how to properly plan our income during that time. 

For many choosing a withdrawal rate in retirement, 4 percent is considered to be a good starting point. For example, if you saved a million dollars for retirement, the 4 percent rule would have you expecting to earn approximately $40,000 a year in income off your saved retirement dollars, not including any funds from Social Security.¹

Keep Earning

If you’re passionate about  your career or enjoy helping others, you may benefit from waiting to retire for an extra year or two. Not only does staying involved increase your overall standard of living, but if you’re healthy enough and willing to continue working, your Social Security could end up being greater in your remaining years. 

This will also allow your retirement assets to have an extra year to expand and strengthen. Encouraging your wealth to last throughout your retirement is easier to manage when you’re still earning and your finances don’t need to work as hard to last. 

You may also want to consider transitioning out of the workforce slowly. If you’re in a position to take on less responsibility or work part time, you may find that continuing to work is less of a chore and beneficial in the long run. 

Protect Your Health

We all know that being sick can take a toll and is quite costly. Making healthier choices throughout our lifetime can help reduce the odds of suffering from conditions such as diabetes, high blood pressure, arthritis, or other chronic illnesses, in turn lowering healthcare expenses.

As we grow closer to retirement, it’s important to take into account that spending money on a healthy lifestyle, as well as receiving regular screenings and accurate medical care, can help improve quality of life. Spending a sufficient amount on preventative care now can be beneficial to lowering more costly expenses in the future. 

Take Control of Your Savings

When it comes to funding your retirement, most Americans use a combination of Social Security, savings and pensions. It’s important to set yourself up for success and think outside of the box since these details may not always meet your expectations. 

Keeping in mind the structure of your costs and the details of your income now as a pre-retiree will help you maintain your wealth in the long run and throughout your retirement. Remaining in control of your finances and always being aware of how much you’re spending will allow you to focus your time and energy on the experiences that matter most to you. 

Better Leverage Assets

The move away from defined-benefit pension plans leaves most Americans with only their 401(k) plans, IRAs and personal savings to fund their retirement needs. But that doesn't mean pension-like income streams cannot be created from these assets.  While most opt for the lump sum distribution from their 401(k) and roll it into an IRA and make distributions as needed, the better choice may be to purchase an annuity with those same assets to create a source of retirement income one cannot outlive.  

And for those who plan to remain in their homes and have substantial home equity using a reverse mortgage to convert equity into a steady income stream can provide additional retirement income, decrease risks, simplify manageability, and extend the life of other assets. 

1. https://www.forbes.com/sites/davidrae/2019/09/17/money-last-in-retirement/