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How to Make Money Last in Retirement

| December 19, 2019
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When you plan for retirement, inflation can be one of your biggest areas of concern. If you retire when you're 65, expect to live to 100, and assume that inflation will erode the value of your savings at 3 percent each year, you need to be prepared for a world where everything you need to buy will cost more than twice what it does now.

How do you make money last in retirement? Any reasonable amount of savings is liable to run out when you don't work for three decades. It's a good idea to plan for every eventuality, and to be extra careful with your money.

Cut down on your fixed expenses 

Your fixed expenses -- your rent or your home maintenance, the food that you buy, transportation, mortgage payments and insurance -- need cutting back on.

It could be a good idea to consider living together with friends under one roof, and splitting expenses. You will end up saving a lot of money. 

Get the most Social Security benefits that you can 

To many people considering retirement, the idea that they can get a check from the government for free starting at age 62 is simply too tempting to pass up on. They believe that they should sign up the moment they are eligible.

When you sign up early for your Social Security benefits, however, you get a smaller benefit, along with smaller cost-of-living increments later on in life.

When you're 62, you are actually young enough to continue working and pulling in a paycheck. You don't really need your Social Security check then.

Continuing to work into your late 60s, and waiting before you apply to receive Social Security payments, will help make sure that you get the largest possible amount of Social Security benefits. These payments will be important if you live really long.

 Make investments for a guaranteed income

People used to be able to retire on a pension from work. Since pensions are no longer common, however, you need to plan to replace in some way the income that will stop coming in once you retire.

It may be a good idea to invest as early as possible in something like a Roth plan or an annuity, for money for retirement. You should speak to a fee-only financial planner to help put together an income stream in retirement.

Draw up a retirement budget

While budgeting can be a bore, it's essential. You need to draw up a detailed plan for how much you will spend each year in retirement.

Typically, you will need to have $1 million socked away for every $40,000 that you need in yearly income. Drawing up a budget can help you understand how much money you need to aim to save before you retire.

Work out a tax plan

You need to remember that you pay taxes in retirement, too. The $40,000 that you make yearly out of every $1 million that you save, is owed taxes on.

When you talk to a certified financial planner about saving for your retirement, you need to make sure that you discuss your taxes.

Work on your health

Everything from colonoscopies to treatment for high blood pressure, cholesterol and arthritis, is expensive. The healthier you are in retirement, the less you will need to spend on healthcare.

 It can be an excellent idea for your finances, to begin paying attention to your health. A healthy lifestyle today can help you make your money go further in retirement.

 Put off retirement by a few years

When you continue to work a few years past your 60th birthday, you get to save more, grow your savings more, and earn a larger Social Security check each month.

Putting off claiming your Social Security by even one year can increase your monthly Social Security payment by eight percent. Each additional year that you work makes a difference. 

Pay greater attention to investing

Many people want to play it safe and stay away from the stock markets altogether. While investing in the stock markets does come with a degree of risk, however, passing on the stock market comes with risks, as well -- you allow inflation to erode the value of your investments. 

It's important to understand that money placed in bank accounts tends to earn two percent or less. You would have to wait decades to even see your money double. It is absolutely vital that you begin investing in stocks, if you started already.

Remember to plan for long-term care expenses

While you hope that you or your spouse won't ever need to fight a long battle with an illness, you need to make preparations, in the event that such an illness does occur. A nursing home can cost as much as $100,000 a year for long-term care. Investing in long-term care insurance can help you deal with expenses that could otherwise break your budget.

Finally, you should consider buying your home early. You'll get in when prices are at their lowest possible levels and see the value of your home appreciate.

One day, late in your retirement, should you need extra money for living expenses, you will be able to tap the equity that you have in your house.

You may be worried about your retirement, or think that you are set; either way, you should know for sure. Work with a financial planner to develop a financial plan and make money last in retirement so that you and your loved ones are taken care of for life.

Matt Logan is experienced with working with his clients to develop the retirement strategies to make money last in retirement. He can help you implement your retirement plan, find tax savings, and help achieve retirement goals. Don’t hesitate to reach out to Matt Logan to see how he can help your retirement strategy. Give a call today at 336-540-9700.

For a comprehensive review of your personal situation, always consult with a tax or legal advisor. Neither Cetera Advisor Networks LLC nor any of its representatives may give legal or tax advice.

The guarantee of the annuity is backed by the claims paying ability of the issuing insurance company.

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