Thinking About Retirement? 4 Tips to Avoid Outliving Your Assets
Transcript
Sivea: Hi. I'm Sivea Key. And welcome to Retirement Safety Zone. Today we begin a series of five short videos addressing how life's challenges might sink your retirement plans, and some tips on how to help keep it afloat. Our first topic is outliving your assets, because the odds are these days that you'll live a long time after you retire. That is the good news, but the bad news is that you'll need enough assets to provide retirement income for those long years ahead, otherwise you risk outliving your money. Most women live longer than most men, and often the woman is the younger of the spouses. That puts more women than men at risk of running out of money before they die, and this problem is complicated by the fact that some retirement income is tied to one person's life. For example, a retired couple may be able to live comfortably on both spouse's social security income, but when one spouse passes away, that can result in the surviving spouse struggling to make those ends meet. Another similar example is if one spouse has a large pension that ends when they die, the loss of that pension income can mean poverty for the surviving spouse. What can you do to protect your income during your life and continue to protect your partner after you die? Well, our top tip is to pay off major debts first. Debt payments cut into your available income. And in retirement, most people are living on fixed incomes, meaning that debt payments are like a leach attached to your savings. Not only do those payments limit what your savings can buy, but they can rob your savings of growth by eliminating major debts while you still have money coming in from a job, your retirement savings will last longer. The second tip is to buy needed guaranteed income. So what do I mean by that? Well, start by taking a good look at your retirement budget and compare that to the year steady income sources like pensions and social security. Compare that with your budget, are you able to pay your basic monthly expenses with that dependable income or are you counting on withdrawals from your investments? If you're counting on investment withdrawals, definitely consider purchasing an annuity to cover the gap. After all, pensions and social security are both types of annuities. Those are contracts to pay you a certain amount of money for a certain period of time up to a lifetime. Buying an annuity to provide the rest of the money you need to cover your household budget means that you have more breathing room when the market is down or inflation is up. With your budget covered you may be able to wait for better market circumstances before you withdraw additional income, and that leaves you with more savings for later. And the third tip is to use those savings wisely by keeping your monthly withdrawals modest early on. You'll have more money available to you later in life. Modest withdrawals will help you in two different ways. One, your nest egg stays bigger longer. Two, you'll have more growth on that nest egg because it's bigger, longer, and that gives you more money to spend at the end of your life. You should also keep a careful eye on required minimum distribution rules, those famous RMDs, to make sure you withdraw enough money from your tax deferred accounts. The excise tax on required withdrawals that are not taken can cost you up to 50% of what that withdrawal should have been, so don't forget your RMDs, and also don't forget to consider the effect on your income taxes when you're withdrawing money from tax deferred accounts versus tax paid accounts or accounts you've already paid the taxes on before you funded the account. Planning ahead can save you on taxes, which leaves more money in your savings. And our final tip is simply keep working. If your savings aren't stacking up fast enough to be able to cover those expenses in retirement, you may want to consider working longer, and when you're working, remember to budget in the savings that you need to make so that you can retire. There are a lot of possibilities. At your very same workplace, or at least in your same job, you might be able to continue working. On the other hand, if your job is valuable enough to the company, they might consider taking you on as a consultant. That would give you some flex time. It would give you a taste of retirement freedom, and it will keep those dollars coming in. The other option may be that someone in your workplace would be interested in job sharing with you. Then you could cut back your hours and just concentrate on saving and on not withdrawing from your retirement as long as you can, and that will gradually build up and allow you to have more money for retirement. On the other hand, if you're feeling more adventurous, try something new. Do you have something you've been dreaming about doing but you were afraid to give up your steady job where you could count on the income? Maybe it was a senior career, maybe it was a new business. Whatever it is, this might be the time to give your dreams a try and help support your adventure or just to add more money to your retirement savings while you work. Consider starting Social Security payments. Just be careful, if you are under your full retirement age, according to Social Security regulations, your income will be limited by the regulation, so check into that before you get started. I hope you found these four tips useful to you and that you're able to shore up your retirement savings so that you can enjoy your longer life. Thank you for spending time with me today. If you found this information was helpful to you, then hey, please give us a thumbs up. And if you would like to continue to learn about how to help other people and different types of insurance that can keep your retirement safe, subscribe to our channel right below. Thanks, and enjoy the rest of your day.
Next Steps
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