People nearing retirement may worry that they will outlast the money they have set aside. As the life expectancy of retirees increases, so should the funds that are being put into savings.
Increased longevity is a blessing but it is also comes at a price; therefore, it is crucial to establish a retirement budget. Whether the client is healthy, has the discipline to stick to a plan, has the ability to stay on budget are all relevant factors to consider. In addition, there are some other considerations:
1.) Pay down debt
Aiming to completely eliminate any debt you have will help to ensure that you do not outlive your retirement savings. Paying off the higher interest debt or setting an earlier payoff goal are practical ways to save later during retirement.
2.) Delay claiming your Social Security benefits
If you are healthy and decide to keep working, consider postponing cashing in your Social Security benefits to earn a higher payout in the benefits owed to you.
3.) Use a Roth IRA instead of a Traditional IRA
Choosing a Roth instead of a traditional IRA means tax-free withdrawals so it would be okay to put a hold on using the funds from retirement without being concerned with rising taxes. Waiting as long as possible before tapping into tax-deferred accounts will allow more time to compound earnings and you will avoid early withdrawal penalties.
4.) Consider Inflation
Planning for inflation means considering what things might cost 20 years from now. Including stocks in your portfolio in retirement will keep your portfolio growing so that you will have enough money throughout retirement.
5.) Gradually ease your way into retirement
Consider working part-time instead of completely cutting off your career. By working on a reduced basis you will find out if retirement is something you are ready for or you might even find an opportunity to try a trade you previously never had the time to pursue.
It is important to save and spend according to your individual needs and goals are in retirement. Set out a list of your financial priorities for the next several years so that you can live a happy retirement regardless of how long it might be.