As the average lifespan has increased, outliving one’s retirement funds has become a real risk. We always stress the importance of budgeting and financial prudence, so here are a few tips that could help make your retirement account last long enough.
Establish Your Needs
Many people tend to retire too early because they underestimate their spending needs - or overestimate their retirement account. The first and most important step is to determine the different areas you should be saving for. Have you started contributing to your children’s college fund yet? Have you paid off your home loan? Do you need to delay your retirement to make sure you have no more credit card debt when you stop working? Seeking the advice of a financial planner will help you understand the complete picture and the different scenarios you must prepare for.
If you find that your current income is not enough to support your planned retirement needs, it may be time to make some lifestyle changes.
- Track Spending: How you spend your money after retirement will determine how much money you need. It is important to keep track of this to understand where cuts can be made. For instance, impulse spending needs to be identified so that it does not morph into a lifestyle expense.
- Cutting Expenses: For instance, if all the kids are in college, finding a smaller home would slash your rental or mortgage payments. Can you and your family make due with one less vehicle to remove a monthly car payment? This could be an important factor for the longevity of your retirement funds. If your lifestyle relies upon dining out often, think about home-cooking more frequently. Have a look at the insurance plans which you have. Life insurance may be the first to go.
- Make Some Money: Just because you are retired, it does not mean you can not make money. Often times, retirees spend large portions of their time on different hobbies. Monetizing a hobby could be a way to generate some extra income. An example could be blogging. Placing advertisements for companies on your blog will create an extra revenue stream.
Balancing Your Portfolio
There is the old saying that you should “never put all of your eggs in one basket.” This is one of the most important pieces of advice for retirement. Putting all your money in one investment is a bad idea. Spreading your investments out in the form of stocks, bonds and appreciating assets is very beneficial. One popular investment choice is an annuity through an insurance company. An annuity essentially means that you make monthly payments to an insurance company now, and in return they give you a monthly paycheck for life once you reach a certain age. Speaking with a financial planner will help you to choose the most beneficial way to spread your investments.