Planning for your retirement is difficult, especially when you don’t have a crystal ball that tells you how long you are going to live.
However, regardless of how old you think you will be, you will probably outlive this number. According to recent statistics, life expectancy rates in the U.S. have jumped over the past three decades. Today, men are expected to live until they are 79 rather than 70, and women will reach 83 instead of 77—and that’s just on average!
With that in mind, how can you make sure your retirement funds stretch far enough for your life expectancy?
Wait Until You Are 70 to Collect Your Retirement Funds
To make sure your retirement funds go as far as possible, try to wait until your full retirement age before you start collecting your Social Security. Even though full benefits are available from the age of 62 (depending what year you were born), if you can wait, the government will bump up your payments a little bit more.
For example, if you were born in 1943 or later, your yearly rate increase will be 8% if you delay your retirement.
Keep Withdrawals at Around 4% a Year
Generally, retirees are able to withdraw approximately 4% of their retirement savings per year. However, it is important to keep your eye on the market while you are doing this. If the markets are down, you might want to reduce your withdrawal amount to 3.5%, but if they are up, you can increase it a little to 4.5%.
The above is based on a 25-year retirement. But if you expect to live 30 or 35 years longer, the “safe” rate drops to 3.4% and 3%, respectively. Therefore, this does mean reducing your annual income by 25% compared to a 25-year plan.
Add Flexibility to Your Spending
If the above figures mean you aren’t going to be able to enjoy your retirement in the way you want to, you might want to consider adding some flex to your spending. For example, you could adjust your withdrawals in accordance with how the stock market is doing. If prices are taking a nosedive, you could make do with less cash, but when they bounce back, you can grow your assets again.
Alternatively, you might want to find another form of income, investing in a long-term plan that will provide you with added savings. From franchising to real estate, and from laddered bonds to immediate annuities, there are plenty of ways you can boost your retirement funds.
The most important thing is to keep things simple, consolidating your retirement accounts where possible. Having a single retirement portfolio that boasts a steady income from Social Security and other assets will be much easier for you and your trusted relatives to manage.
Have you made savvy retirement plans or have you found another way to fund your retirement? We’d love to hear about them in our comments box below!