Here’s how to feel better about retirement while you’re in the planning stage.
Retirement can be an exciting period of life. But the years leading up to it can be stressful.
In the course of your planning, you might start to worry about things like not having enough money, or running out of money sooner than you want to. But if you make these moves, you might quickly start to feel better about the idea of closing out your career and leaving the workforce for good.
1. Establish a Social Security filing strategy
Chances are, you’ll be at least somewhat reliant on Social Security to cover your senior living costs. Knowing when you’ll file for benefits should give you a better sense of how much money the program will pay you every month.
If you claim benefits at your exact full retirement age (which is 67 if you were born in 1960 or later), you’ll get your full monthly benefit in retirement based on your earnings history. Filing early will mean getting a reduced benefit, and that option exists once you reach the age of 62.
You can also delay your Social Security filing for a larger monthly benefit. For each year you put off your claim past full retirement age, your monthly benefit grows 8%, and you’ll be credited financially for delaying your filing up until the age of 70.
2. Determine a withdrawal strategy for your savings
Ideally, you’ll go into retirement with a decent-sized nest egg. But you may be worried about depleting your 401(k) or IRA at a point when you still have many years of retirement left ahead of you.
That’s why it’s important to establish a withdrawal strategy for your savings. Talk to a financial advisor or look at online calculators that help you determine what percentage of your balance you can afford to withdraw annually without running down your balance too quickly.
As a general rule, you may want to plan on withdrawing anywhere from 2% to 3% of your nest egg each year, assuming you have average health and are planning on a retirement with an average length. But again, it’s good to customize a specific strategy ahead of time. And remember, you can always adjust that strategy as you go.
3. Invest your savings savvily
Another good way to help ensure that your savings won’t run out on you in retirement is to put your money into the right investments. Contrary to what you may have heard, you don’t necessarily want to dump all of your stocks ahead of retirement, because you’ll need some in your portfolio to keep generating growth.
At the same time, you don’t want to be overly invested in stocks in case the market tanks or experiences lots of turbulence. It’s important to find the right balance, and you can determine what that is by not only speaking with a financial advisor, but thinking about your different income sources and your personal tolerance for risk.
It’s easy to get anxious about the idea of giving up a steady paycheck from work. But if you make these key moves ahead of retirement, you might feel a whole lot better about the idea of wrapping up your career and embracing this next stage of life.