What to Do When You Might Live Beyond Your Savings
One of the scariest things that can happen to a retiree is outliving their savings. Thanks to improving medical technology and better knowledge about staying healthy in old age, life expectancies continue to increase. Many retirement experts now recommend estimating you’ll live till at least age 90.
This makes the creation of safe retirement strategies even trickier than it used to be. Many plans that might have worked well based on data in the 1980s may not be enough now. And if you’re already retired, you might feel stuck. But could there be a way to stretch your savings even after retirement? Here are three ways to make your money last longer:
Revisit Your Retirement Budget Yearly
Proper budgeting is one of the most important skills that a retiree can use to make their money last for the long term. Few retirees really stick to their budgets. Sure, it’s expected that for the first couple of years you might spend as much as you did while you were working because you’re enjoying that vacation you’ve put off for so long. But once the initial shine of retirement wears off, settling your lifestyle within the limits of your savings and their projected growth is crucial. Revisiting your budget yearly can help you take into account the growth of the market, the effects of inflation, any increases in expenses and other changes to your financial situation.
Your budgeting should also include setting an appropriate annual withdrawal rate from your nest egg. The best initial withdrawal rate is around 3–4 percent. This allows your remaining savings to continue to grow at a good rate. You might even squeak it up to 5 percent in the beginning just to take that vacation. This base percentage should be adjusted yearly to account for inflation, another reason to keep a budget.
Start Work Again
Thanks to the internet, there are now legitimate ways to earn money at home through jobs like freelance writing or performing tasks online. You could also start what’s called an encore career, which is finding a job that’s more about personal fulfillment than earning money yet still adds an additional buffer to your savings. As a retiree, you have nothing to lose by choosing to go back to work. It’s like being 20 again and having a host of careers at your fingertips, but with another 50 years of life experience under your belt.
Consider an Annuity
An annuity can provide insurance against your money running out too soon. Depending on your age, you could get an immediate annuity, which pays out as soon as you buy it, or a longevity annuity, which won’t start until late in life. Your annuity payments should be enough to cover what Social Security and any pensions don’t cover. That way you can still support yourself even if you’re not living a high-end lifestyle anymore. Don’t forget to account for inflation!