How To Make Your Money Last In Retirement

How to Make Your Money Last in Retirement

Updated on Aug 07 2019


Being financially prepared for a retirement that lasts the span of your retirement takes strategic planning and careful budgeting. Living on a fixed income is challenging for many retirees, especially as longevity and inflation continue to increase. Learn how you can set aside enough money to last in retirement, while strategically earning money throughout retirement.

7 Tips for Making Your Money Last Through Retirement

The average life expectancy in the United States has increased dramatically over the last few decades. Today, adults who live to be 65 years old have a 20 percent chance of living into their 90s. Increased longevity is great news, but it also means Americans need to plan for a longer retirement. These steps can help you manage, and even increase, your savings and investments to be sure it lasts for the duration of your retirement.

1. Take advantage of high interest earning accounts.

Don’t be tempted to leave money in a low interest checking account, ignoring even small differences in interest rates. Even an additional 1.00 percent interest increase can make a huge difference in retirement. For example, $20,000 in an account with 0.6 percent interest earns $12 per year. If that money were in an account that earned 1.85 percent interest, you would yield $370.50 per year without any additional deposits. Over time, these yields can add up. Consider moving funds to a high-yield money market account that typically earns nearly 2.00 percent interest while still giving you easy access to your savings.

2. Plan for medical expenses.

Medical costs and long-term care expenses are often overlooked in retirement planning. A recent study from Fidelity found that the average couple who is 65 years old will need $260,000 to cover medical expenses in retirement - and that does not include long term care costs. Original Medicare does not cover all healthcare costs. Consider purchasing additional Medicare coverage like Medicare Advantage, Medicare Supplement, or Medicare Part D. These are offered by private companies so be sure to have a clear understanding of what is actually being covered by your health insurance.

3. Maximize employer contributions on retirement accounts.

Many employers offer 401(k) retirement plans that are tax-deferred investment accounts and will match contributions up to a certain amount. Individuals are allowed to contribute up to $18,500 per year in pre-tax interest-earning retirement savings. As return rates and your risk tolerance will change over time, check in on your 401(k) periodically to make sure you are still hitting your retirement planning milestones.

4. Eliminate debt.

Eliminating debt, other than housing debt, is crucial to a healthy financial future. Make an effort to pay off student loans and focus on paying off high-interest credit card debt. Consider taking out a personal loan to pay off outstanding high-interest credit cards which, depending on your personal situation, may have a lower interest rate than making a monthly payment on a credit card.

Other ways to eliminate debt include refinancing your mortgage, downsizing your home, and making an effort to live within your means while contributing to long-term savings.

5. Choose your retirement destination strategically.

When it comes to saving money in retirement, not all states are equal. Moving to a state with lower tax rates for retirees on state and local taxes can help your money last in retirement. Consider which states are the most retirement friendly and see if any of them line up with your retirement plan. Even moving just across the state line may result in substantial savings.

6. Delay Social Security income benefits.

For most retirees, Social Security is a major source of income. To maximize your Social Security benefit, consider delaying your benefits until 70. You can receive Social Security benefits starting at 62 but you will receive 20 percent to 30 percent less than the maximum benefit. To increase benefits work longer and wait until after you are 65 years old. Every year worked over the age of 65 (up to 70) will increase your benefit.

7. Get expert financial advice.

When it comes to long-term financial planning, speak with a fiduciary financial advisor who can give you expert advice in managing your money throughout retirement. Advisors can help you set and reach long-term goals, help you understand your investment options, control your risk tolerance and give you more confidence in your financial future.

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