As far as finances go, a major concern of most retirees is running out of their retirement savings. It is indeed a grave predicament to find oneself in, and one that should be avoided at all costs. If you are wondering what you need to do in order to ensure your nest egg lasts you for as long as you live, here’s what:
The first thing you need to do to secure yourself against financial distress in your retirement years is to maximize your social security. Even though you are entitled to social security payments for the rest of your life, it is important to understand how to maximize these payments. Do this by carefully deciding when to sign up for benefits and coordinating your claiming decisions with your spouse. If you delay in taking Social Security for a year, you get an 8 percent increase in the benefits that you take, and this is true for every year you delay.
If you wish to have enough money to last you the entirety of your retirement, plan your finances as if you will live into your 90s or even until you are 100. Many people will plan for too few years only to live longer and become completely dependent on Social Security.
Protect yourself against inflation by investing a portion of your money in investments that have the ability to keep up with inflation. Equities, commodities, real estate, investing in gold and even some government bonds have historically kept pace with inflation and you should consider adding these to your portfolio.
If you are willing and able to afford it, consider investing a portion of your money in an immediate annuity. An immediate annuity guarantees you a stream of payments that will continue for the rest of your life. Talk to your insurance company about this, but remember not to annuitize all your money because you need funds available for emergencies.
If you want your money to last you for the rest of your life, you need to control your withdrawal rate. Take only small distributions from your portfolio, and withdraw even less during those years when your portfolio is behaving poorly. A 4 percent withdrawal rate will increase the chances of your money lasting longer, and if you can go below that, the better. Anything higher than 5 percent is risking running out of money during your retirement.
Retirement can be a great time, or a distressing one, depending on how you plan your finances in your earlier years. Make the right financial choices and you’re most likely to have a great retirement.