Once you retire, you’ll still want to have financial security. Having financial security, though, is hard, even for retired people.
The only source of funds you’ll likely have as a senior citizen is your retirement savings.
One of the common issues that may bother you is how long your retirement savings can sustain you. Stretching them requires a unique and effective strategy.
Most often than not, you may find that standard stretching techniques for your retirement funds don’t work.
The Amount of Retirement Savings You’ll Need
To maximize the chances of successfully sustaining yourself during retirement, ensure that your savings makes up 70 percent of your yearly non-retirement income.
You’ll have to make sure you have enough funds to cover daily and other necessary living expenses. These expenses include but are not limited to foods, rent, transportation, and medicines, among others.
Your non-retirement income can consist of savings, investment, social security funds, part-time employment income, a pension, and rental business profits, among others.
Remember, your daily living expenses may likely increase after you retire. Some other costs, though, can decrease after your retirement.
Once you retire, on the other hand, your days of saving for your retirement funds shall be over. By this time, you may be done paying off all your previously impending loans.
Means to Make Your Retirement Savings Last for a Long Time
The 4% Rule
You withdraw 4 % away from your savings in the initial year. Afterward, for each succeeding year, you remove the same amount of funds. Additionally, you modify the inflation rate.
William Bengen conceptualized the 4 % rule in 1994. According to this rule, if you make a 50 percent investment in stocks and bonds, you’ll have chances of accessing inflation-adjusted funds.
These funds makeup 4 % of your investment annually in the next 30 years, or longer, depending on the current return of investment.
The Strategy of Income Floor
In this strategy, you don’t need to sell stocks when the economy is not doing good. Thus, in turn, you save money on your savings.
First, compute the total amount you’ll need for daily living expenses, such as food and rent. You have to ensure that an income guarantees coverage of these expenses.
Examples of guaranteed income include social security benefits, a bond ladder, and an annuity. Knowing the exact or approximate amount of your monthly daily expenses is the key to avoiding being broke.
Have the additional funds you’ve saved in savings cover for unexpected incidental expenses.
Make a Premium Dividend Stocks Investment
Dividend stocks are means of passive income that are appealing to senior citizen retirees. By investing in premium dividend stocks, you minimize the need to depend on liquidated stocks to support withdrawn funds for retirement financially.
Stock liquidations lessen your earning capability in the years to come. Likewise, stock liquidations boost your risk of encountering economic instabilities.
You might want to invest in stable securities to avoid the risk of economic instability. However, premium dividend stocks can provide a different degree of financial protection.
Premium dividend stocks are more fickle than government bonds. But, the former usually produce higher investment returns.
Don’t Enjoy Your Social Security Benefits Right Away
It may not be the best idea to enjoy your social security benefits as soon as you turn 62. The longer you delay enjoying your social security benefits, the greater the monthly payments you’ll get from it.
Find out how much additional funds in social security payments are available to you. By knowing this information, you can make an objective decision as to when to claim your social security payments.
Don’t be impulsive. It’s always better to look at the overall picture before you make a significant financial decision.
Continue Being Employed
Making a year or two employment extension can substantially increase the amount of your retirement savings. Every year you’re continuously employed, retirement funds are added to your savings.
Likewise, the same scenario extends the time that you’ll need to consume your retirement savings funds. If you can’t or prefer not to work full-time, you can work part-time to increase your retirement funds.
Even if you’re not able to give contributions for your future retirement, the income earned from part-time work covers the additional funds you’ll save.
Accurately Budget Your Funds
Budgeting is the primary means of making your retirement funds last for the long term. If you have not yet set a fixed budget for your monthly living expenses, you might have enough funds to cut down 10 % or 15 % of the costs you spend on your daily living.
Cutting down such monthly expenses can provide additional top-up years of stretching your retirement funds. Go over your recurring monthly bills in your bank account. By doing so, you’ll know the unnecessary bills to stop paying to save more funds for retirement.
Have a Firm Distribution Strategy
Be firm in standing by in having a distribution strategy. A distribution strategy prevents you from overspending issuing checks from your bank account.
You may want to include liquidations and withdrawals done monthly. For your comfort, though, you can also have dividends and interest accumulated to sustain your daily expenses, as well.
A distribution strategy also features a “bucket” approach. You can save your earned funds into bundles of cash that can last for temporary, moderate, and long-term coming.
You can invest those earned funds in various ways based on the appropriate time frame. You can convert your short-term bucket into cash. In the meantime, you can turn your long-term bucket into growth stocks.
Pay Off Expensive Debt
Prioritize paying off expensive debt before you claim your retirement funds. Pay for these expenses using your savings if you need to do so.
True, you’ll lose some funds saved if you use your savings to pay for an expensive debt. But, you’ll save money on living expenses after you’ve paid for a costly debt before claiming your retirement funds.
Move to a State with Affordable Living Standards
Even after you’ve been enjoying your retirement benefits, you’ll save more money if you live in a state with reasonable living standards.
The move may not be easy to make. So, you have to be decisive when making this move if you want to save money.
Downgrade Your Home
Mortgage fees can be costly. You may want to sell your house to pay off the mortgage and buy a new home. Make sure, though, your new home is not mortgaged.
Moving into a new home allows you to have cheaper insurance and utility fees, as well. You can likewise downgrade your home without selling your current home and moving into a new residence.
It would help to move your stuff around to create free space. Then, you can lease an empty room to another resident to make additional passive income.
You may also want to rent out your garage or basement to another individual or small business.
Care for Your Health
Healthcare expenses can be high and, thus, burdensome. Even if you have health insurance, there are tons of out-of-pocket fees you’ll need to pay most of the time, as well.
You can avoid these expenses by living a healthy lifestyle. Living a healthy lifestyle means eating and exercising well.
If you get to avoid paying skyrocketing out-of-pocket medical fees, you’ll save more funds in your retirement money.
Sell Life Insurance You Don’t Need
If you’re older than 70 years old, you may have the choice to sell life insurance you don’t need. This transaction is called a life settlement.
A life settlement involves giving away your unwanted life insurance to an investor. This investor is the person who manages the associated death privileges and pays for the premium fees.
The processing of a life settlement transaction produces a one-time cash benefit. The proceeds from a life settlement transaction are tax-deductible. However, you can utilize the cash benefits in any way you want to.
Claim More Social Security Payments
There is more than one way of doing this. The means of claiming more social security payments are:
- Social Security Benefits Guaranteed for a Lifetime
There are creative ways to maximize the number of social security benefits you’ll get. At times, though, they are tricky to discover and implement.
- 35 years of Guaranteed Benefits
Get your social security benefits from the average amount of indexed earnings you earn monthly. Such an amount is calculated from the 35 years of your job’s longevity.
- Spouse Associated Social Security Benefits
When both husband and wife are older than 62, and one of them accesses retirement funds, the other half can claim a spouse-associated social security benefit. A spouse’s associated social security payment might be more significant than different types of insurance payments.
Reevaluate the Allocation of Your Asset
Your timeline, age, risk choices, and liquidity needs determine how you’d allocate your asset for reevaluation. Depending on the results of such an analysis, you may want to balance your stocks, bonds, mutual funds, annuities, and other possessed assets.
There are three-quarters of seniors who are concerned about running out of funds. However, only a quarter of seniors should have this issue as their concern.
Regarding how long your retirement savings will last depends on your efforts to apply the suggestions above. However, this situation is not absolute. Likewise, your retirement savings will last depending on your application of other factors affecting your case.
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