Life expectancy is increasing — and that means you’ll need to stretch your retirement savings longer than ever. These seven strategies can help.
1. Save … and Then Save Some More
Naturally, the more money you can stash, the more you’ll have to fund a long and comfortable retirement. Focus your efforts first on employer-sponsored plans. These plans typically offer an employer match, which basically puts free money into your account.
• Tip: Once you reach age 50, you can make “catch-up” contributions to your 401(k) (an extra $6,000 per year) and IRA (an extra $1,000 per year). Learn more from the IRS.
2. Diminish Debt and Downsize
The less you spend during retirement, the longer your savings will last. So cut expenses wherever you can. Try to pay off your home loan before you retire, since it’s likely your largest expense. Plus, the benefit of an interest tax-deduction may matter less during retirement.
With no mortgage, you’ll primarily be paying for daily living expenses and entertainment. And you can often reduce these expenses — for instance, by dining out less often or opting for a less costly mobile phone or cable plan. All of which allows you to minimize your retirement account withdrawals.
• Tip: If you can’t swing a payoff, consider refinancing or downsizing to a smaller home. Either one could reduce your monthly payment. A smaller home may also have smaller utility, insurance and upkeep costs.
3. Protect Your Assets From the Costs of Care
Seventy percent of people turning 65 will require long-term care some day.1 If that means moving to a care facility, you could see bills of $3,500 to $6,000 per month, which can eat up your assets pretty quickly. That’s particularly true since government agencies such as Medicaid and Medicare require you to pay down your assets before getting assistance. Consider long-term care insurance to protect retirement assets that you hope to leave as a legacy.
• Tip: Learn more about long-term care insurance at this U.S. Department of Health and Human Services website and from your Hancock or Whitney Financial Advisor.
4. Assess Your Emergency Fund
Plan to keep enough liquid assets to cover one to three years’ worth of living expenses. You can use this money to pay for home or vehicle repairs, or other emergency needs, without adding new debt.
• Tip: If the market goes south, some people halt withdrawals from their retirement accounts and live off these liquid assets until the market corrects.
5. Reconsider the 4% Rule
One rule of thumb suggests that you withdraw 3% to 4% of your retirement savings each year (adjusted for inflation). Just remember: This is only a guideline. A realistic number for you will depend on your expenses, your risk tolerance and your asset allocation.
• Tip: Talk with your Financial Advisor to create a withdrawal plan based on your specific goals and savings. Re-evaluate on a regular basis.
6. Prolong Your Income
If you can put off retirement, you have more time (and income) to put into your retirement savings. Even part-time work can help, particularly if it offers health insurance benefits.
• Tip: If possible, delay your Social Security benefits, too. If you begin distributions at age 62, you’ll get 20 to 30 percent less than if you wait until the full retirement age of 70. (There’s no additional increase in benefits after age 70.) Social Security rules can be complex, so read more at the official Social Security Administration website.
7. Rebalance Your Portfolio
Everyone, regardless of age, should review how their money is invested, based on their risk tolerance, on an annual basis. Life changes occur in retirement, too, and your living expenses may not be what you projected they would be.
Your Hancock or Whitney Financial Advisor can assist you in reviewing and rebalancing your investments, and help you create a customized plan that lets you make the most of the funds you have, for the length of your retirement.
1 “The Basics,” LongTermCare.gov, http://longtermcare.gov/the-basics/, accessed July 15, 2016
Securities are offered through Hancock Investment Services, Inc., known and doing business as Whitney Investment Services, Inc. in Texas and Whitney Investment Services, and not through Whitney Bank. Hancock Investment Services, Inc. is a registered broker/dealer, member FINRA/SIPC, and a wholly owned subsidiary of Whitney Bank. Insurance products are offered by various insurance company affiliates of Hancock Investment Services, Inc.
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