Turning your retirement savings into a stable and sustainable income can be challenging. Follow these 6 strategies to help ensure your hard-earned money lasts.
Retirement is a milestone many look forward to, marking the end of our working lives and the beginning of a new chapter. However, turning your retirement savings into a stable and sustainable income can be challenging. As life expectancies increase and pension systems continue to shift away from traditional plans and move towards consumer-saving plans like 401(k)s and annuities, smart strategies can help make your hard-earned money last a lifetime.
How are they doing it? As retirees and pre-retirees navigate this era, the Athene Retirement Planning poll fielded by Kiplinger shows how your financial plans could change.
Aligning Social Security plans with reality
A secure financial future often hinges on Social Security benefits as retirement approaches. However, the Athene poll highlights a concerning disconnect between pre-retirees’ plans and retirees’ realities when it comes to claiming Social Security benefits.
According to the poll, most pre-retirees plan to only claim Social Security once reaching full retirement age, with only 11% saying they expect to claim benefits at the earliest age possible. Yet, reality paints a different picture, with 41% of retiree respondents opting to claim benefits as soon as they are eligible at age 62. This discrepancy can have significant implications on their overall retirement income.
Withdrawal strategies to help bridge the gap
Planning for a smooth transition from retirement savings to a sustainable income can be a crucial step on the road to financial security. However, among pre-retirees respondents, 46% don’t have a retirement income withdrawal strategy yet. And, putting one into action can be arduous.
Also about one in four (27%) retiree respondents haven’t developed a concrete withdrawal plan, and the poll reveals that women (43%) are less likely to have a safe withdrawal strategy compared to men (27%).
The shift from pensions to personal responsibility
The continued shift from traditional pensions to 401(k)s and similar plans put more responsibility on workers. Among retiree respondents under age 65, 51% have an employer pension, compared to 33% of pre-retiree respondents. In light of this trend, it is even more important for individuals to make informed decisions about retirement funds.
Cost dictates retirees’ residential choices
Retirement brings a myriad of choices, and one of the most important is where to live during their retired years. According to the poll, most retirees (59%) prefer to remain in their current locations rather than relocate. Of those respondents who do make a move, nearly 57% do so to reduce retirement expenses, opting for states with lower taxes and a more affordable cost of living.
Healthcare and inflation are top concerns when it comes to the cost of living in retirement. More than half of respondents (53%) have faced the reality of higher-than-expected inflation rates, and 29% are paying more for healthcare than initially anticipated.
Strategies to help make your money last
As the curtain closes on the chapter of your working lives, transitioning from retirement savings to a reliable and enduring retirement income becomes a pressing concern. Here are a few essential strategies that can help your hard-earned money last throughout retirement.
- Maintain a diversified investment portfolio: Spreading investments across various asset classes, such as stocks, bonds, real estate, and cash, can reduce the risk of relying heavily on one specific asset.
- Secure guaranteed income sources: Social Security benefits and annuities are examples of sources that can provide predictable income, but understanding when and how to claim Social Security benefits optimally is crucial.
- Implement flexible withdrawal strategies: Rather than following a rigid withdrawal plan, consider a dynamic approach that takes into account market performance, life events, and unexpected expenses.
- Create a contingency plan: Prepare for unexpected events by setting up a safety net, such as an emergency fund, insurance coverage, or long-term care planning, to help protect your assets and financial well-being.
- Review your finances regularly: Regular financial assessments can help track progress, reassess goals, and adjust retirement plans as needed.
- Reduce unnecessary expenses: Identify areas to cut back on spending to free up funds to support retirement income for a longer period.
Shaping regret-free retirements
Retirement is a time of reflection, and it’s not uncommon for retirees to ponder the “what ifs” and “if onlys” that arise in hindsight. The regret of not saving more (expressed by half of retirees) and not starting retirement planning earlier (voiced by 41%) can cast a shadow on this cherished phase of life.
However, there is a silver lining: financial professionals hold the key to transforming regret into empowerment by guiding clients toward proactive retirement planning. Take the first step towards a worry-free retirement by meeting with your financial professional today to discuss your situation.