How to Make Your Retirement Money Last
This website doesn’t get into offering financial advice too often and there’s a very good reason for that. Only a qualified financial advisor who is also a fiduciary has the credentials needed to offer guidance that you can “take to the bank” and feel confident that you’re doing the wisest thing with your savings. But, when it comes to the subject of how to make your retirement money last, there are four strategies that almost all advisors will include in creating your financial plan. Although you’ve probably heard at least a couple of them before, they are worth repeating and following.
The first step is one that we’ve discussed within these pages and is something we believe very strongly in and that is to create a retirement budget that fits your portfolio and lifestyle. Budgeting wisely is critical. If you want an easy answer for how to make your retirement money last, it would be to not spend more than you have coming in as income. It sounds simple but the budgeting process is something most retirees fall short on, and the main reason is that they didn’t capture every expense related to the lifestyle that they want to enjoy in retirement. If you’re not capturing every expense over the course of an entire year, you haven’t done a complete job. That budgeting process should include cost cutting measures and the elimination of unnecessary bills.
The second factor to review is your portfolio, or the money that you are counting on to get you through your Golden Years. If you want to know how to make your retirement money last, you’ve got to know how much you have and how it is invested. Diversification is critical here. There should be an appropriate mix of cash, bonds, stocks and real estate. What that “appropriate” mix is depends on the amount of money you have and the amount of money you need to withdraw each year. This is where my guidance stops because you should put your faith in a good financial advisor. That advisor should not make an income from any of your investments except for the advisory fee that should be clearly stated. The reason that your advisor should be making money from a financial instrument such as an annuity is because it will usually bias the advice that they give. Annuities can be made to sound wonderful and financially attractive, but they come at a fairly high cost and part of that cost is the fee that is paid to the seller of that policy. It is important that your portfolio is diversified and that you receive sound advice from a certified financial professional.
The third consideration in pondering the dilemma of how to make your retirement money last is the creation of your withdrawal strategy. This is going to rely on the first two points as well because you want a very thorough budgeting process to be the foundation of your withdrawal strategy. While there are many people who follow the 4% rule, there are many other factors to consider and that’s where your budgeting process becomes very important. You may want to travel early in your retirement, which could dictate a slightly higher withdrawal, or you may want to lessen that percentage to make sure that you are building your funds to keep pace with inflation or projected health costs which, unfortunately, are a fact of life. If you have money in an IRA or 401K, keep in mind that there is minimum amount that you need to withdraw once you reach a certain age. You can find these Required Minimum Distribution (RMD) amounts and the age you need to start them on the website of the Internal Service.
If you do each of these three things, you’re well on your way to solving your problem of how to make your retirement money last and have actually taken care of our fourth piece of advice in the process. That is to be an informed and involved participant in managing your finances. Stay informed by following market trends and being aware of the fastest growing sectors of the economy as well as those factors which could negatively impact your investments. Any good financial advisor will tell you that they work best with clients who are well-informed and take an active interest in managing their life savings. Too many retirees “outsource” this task because they don’t think they have the expertise needed to manage their money. With a little effort you can gain quite a bit of knowledge and might even become fascinated with the investment world. Although many people might disagree, I think investing is one of the best hobbies there is and you can do it even with limited funds because one investment can turn those limited funds into quite a bit of money in a short time. Can you turn a thousand dollars into a million? Yes! It’s done all the time. But it’s not like the lottery where the money multiplies in a week. You do need some time to build a fortune, but you can get a lot of satisfaction watching one investment gain twenty, thirty, forty percent or more within a week. This is an exciting world, but it does require some discipline. We’re all attracted to the stories of creating a fortune overnight and, although this can happen, the more likely scenario is to be able to increase your wealth steadily over the course of a lifetime.
If you don't think you have the funds needed to create a little portfolio to manage on your own, why not consider an activity that will generate a few hundreds to do exactly that? A retirement job for a couple of weeks could "fund" your bankroll in a surprising short time. Remember, the stock market has changed dramatically since the days of our youth. You can buy and sell one share of stock at a time, and you can do it with no commissions. A series of profitable trades will be all you need to catch the "investment bug" because it can be very exciting when you watch your investment grow that quickly. Another way to get some extra money is to consider selling some of your "stuff" on a site like eBay. You'll be something almost every retiree needs to do which is to "declutter" and you might be getting the money you need to start a new hobby that has certainly given me a lot of satisfaction as I learn a new skill and learn the ins and outs of the global economy. Not surprisingly, the more I learn the more I realize how much I don't know. It really is something you can study for a lifetime.
When you consider how to make your retirement money last, never overlook the possibility of making more!
When you look at the challenge of how to make your retirement money last, don’t rule out the possibility of making it grow as well. Money that is wisely invested wisely, the compounding gains can produce a lot of money very quickly. There’s the story of a banker being asked to name the Seven Wonders of the Ancient World. He replied that he couldn’t even name one of those seven wonders, but he knew what would be the eighth one: compounding interest. Taking an interest and becoming an active participant in managing your investments is one of the smartest things you can do. Who knows, it may even get you started in a new hobby and down the path to increasing your wealth. Consider the possibilities because it might be one more way you can Enjoy Retired Life!
Thanks for visiting. If you like what you see here, please tell your friends. If you haven’t done so already, be sure you take The Self Discovery Challenge for Retirement! It’s designed to help you make the most of this wonderful time of your life.
If you think it might be fun to start your own website (it is!) please look here.
Tired of joint pain caused by inflammation? There’s a company that has made wellness a reason for their existence. They have products that have helped me tremendously. I invite you to take a look here.
Please be aware that clicking on some of the suggestions made on this page may result in a commission being earned by the author.