How to Make Sure Your Retirement Assets Last as Long as You Do

It may be the single biggest worry for any individual planning for their golden years: How do I ensure that I don’t run out of money before I run out of breath?

With retirement experts warning that a million Dollars in retirement savings might not cut it these days, it’s understandable if you’re among the worried lot.

Securing a retirement corpus that lasts as long as you do is essential. By carefully managing and investing your savings, you can ensure financial stability throughout your retirement journey.

This article explores 6 key strategies to help you ensure your retirement corpus doesn’t deplete prematurely. By implementing these techniques, you can safeguard your financial well-being and enjoy a comfortable retirement that lasts a lifetime.

1. Start Planning Early and Set Realistic Goals
   According to a 2015 Employee Benefit Research Institute survey, only half (48 percent) of Americans have attempted to figure out the amount of money they should be saving for retirement.

   To set your saving target, estimate how much income you’ll need to replace in retirement (a popular rule of thumb is 80 percent of your working income).
   The foundation of a long-lasting retirement corpus begins with early planning. Set realistic goals based on your desired retirement lifestyle, expected expenses, and life expectancy. Remember that you may spend more on some categories, such as healthcare, and less on some categories, such as mortgage.

   Start saving for retirement as early as possible to maximize compounding returns over time.
   Consider working with a trusted financial advisor to establish a comprehensive retirement plan tailored to your unique circumstances and objectives.

2. Diversify Your Investment Portfolio
   Diversification is a crucial strategy for mitigating risk and maximizing long-term returns.
   During the initial stages of your retirement savings journey, the impact of market fluctuations may hold less concern as you have ample time to recover from any losses.

   However, safeguarding your nest egg becomes a priority as you approach retirement. Once you have officially retired, it becomes essential to construct a low-risk portfolio that focuses on preserving your hard-earned savings while generating a reliable income stream.

   A low-risk portfolio designed to prioritize capital preservation is critical in ensuring your savings endure throughout retirement. By allocating your investments towards stable income-generating assets, such as bonds or dividend-paying stocks, you can establish a dependable cash flow stream to meet your financial needs.

   It’s crucial to recognize that transitioning from an aggressive growth strategy to a conservative preservation approach is a gradual process that aligns with your changing circumstances and risk tolerance.

   Consulting with a financial advisor can provide valuable guidance in designing a personalized investment strategy that addresses your specific retirement goals, risk profile, and income requirements.

3. Consider Longevity Risk and Plan for Inflation
   One of the significant challenges to a lasting retirement corpus is longevity risk—the possibility of outliving your savings.
   Plan for a longer life expectancy and account for potential medical expenses, long-term care costs, and inflation.

   Long-term-care expenses, for instance, can be overwhelming. With the annual national median cost for assisted living facility care services running about $54,000 , this isn’t a cost most retirees can easily shoulder.

   Incorporate inflation-protected investments and insurance products into your portfolio to maintain purchasing power and protect against rising expenses in the future.

4. Optimize Social Security Benefits
   Social Security benefits form a significant part of many retirees’ income. For an estimate of your Social Security benefits, you can:
   a. Go to www.ssa.gov and click on “check your information or benefits” under the “benefits,”
   b. Use the Retirement Estimator on the website’s home page.

   Maximize your Social Security benefits by carefully planning the timing of your claim. Delaying benefits beyond your full retirement age can lead to higher monthly payouts, providing a more substantial financial cushion in your later years. Consult a financial advisor to determine the optimal strategy for claiming your Social Security benefits.

5. Implement Withdrawal Strategies
   When it comes to withdrawing funds from your retirement corpus, a structured approach is crucial to ensure sustainability.
   Consider implementing withdrawal strategies, such as the 4 percent rule, where you withdraw a fixed percentage of your portfolio each year.

   According to a longstanding benchmark, by withdrawing no more than 4 percent of your assets in the first year of retirement and adjusting your withdrawals for inflation annually afterward, your assets should last as long as you do.

   This approach helps balance your income needs with the preservation of your savings for the long term.

6. Work A Little Longer
   There are some key reasons that make working longer a powerful tool for securing your retirement.

   Firstly, by choosing to remain employed, you are effectively safeguarding the savings that would have otherwise been utilized to cover your day-to-day living expenses. This preservation of funds allows your retirement nest egg to continue growing, ensuring a more substantial financial cushion.

   Secondly, continuing to work beyond your full retirement age (currently set at 66) offers a unique opportunity to delay claiming Social Security benefits. For each year of delay, you are rewarded with an 8 percent increase in benefits until age 70. This boost can significantly impact the overall value of your benefits, providing greater financial security during your retirement years. Moreover, postponing your pension eligibility date may result in an augmented pension payment.

   Lastly, an additional year on the job allows you to contribute more funds to your retirement plan. By redirecting a higher portion of your income towards retirement savings, you are effectively bolstering the financial foundation of your post-work years. Furthermore, these added contributions have the potential to generate greater investment returns, compounding your overall wealth over time.

7. Regularly Review and Adjust Your Retirement Plan
   As you progress through your retirement journey, it’s essential to regularly review and adjust your retirement plan.

   Life circumstances, market conditions, and personal goals may change over time, necessitating adjustments to your investment strategy.

   Stay informed about the performance of your portfolio and consult with a financial advisor to make informed decisions and ensure your retirement corpus remains on track.

Conclusion
Creating a retirement corpus that outlives you requires careful planning, diversification, and ongoing management.

By starting early, diversifying your investments, regularly reviewing your retirement plan, considering longevity risk, optimizing Social Security benefits, and implementing withdrawal strategies, you can increase the likelihood of a financially secure retirement that lasts a lifetime.
Remember, the key is to stay proactive, informed, and adaptable to ensure your retirement corpus continues to support your desired lifestyle well into the future.

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Material contained in this article is provided for information purposes only and is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates, Inc. These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable– we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.