Outliving your savings: How to avoid a retirement that runs short
Planning for a long retirement can make saving enough feel daunting. But even some simple steps now can help ensure you have the funds needed to enjoy your retirement, worry-free.
Tips for saving for retirement
Be proactive about preserving—and increasing—your savings for retirement with these tips:
Visualize your retirement.
Put your retirement savings into context by thinking about your lifestyle and the things you'd like to accomplish once you retire.
"We begin our discussions by getting people to visualize their retirement," says Michele Kocak, Vice President of Retirement Services for Independent Benefit Services in Rockville, MD. "Whether their goals are to travel, downsize their lifestyle, or pay for their grandkids' college, it's easier to develop a plan when you visualize something."
Evaluate your assets.
Take a look at the available assets you anticipate having for your retirement to get a clearer picture of your financial situation.
Keep in mind that looking at retirement savings as a lump sum can sometimes be deceiving. Kocak says it's always beneficial for clients to look at their savings from the perspective of how much monthly income they may have available.
Keep fueling your savings.
Even if retirement is just around the corner, it can help to continue aggressively funding your retirement.
"Save as much as you can while you're still employed," Kocak says. "Maximize your contributions to help take full advantage of your ability to save in your employer-sponsored retirement plan.”
Other strategies to consider may include making catch-up contributions to your employer’s retirement plan (if allowed) or to an Individual Retirement Account (IRA).
If you enjoy your current job, consider putting off retirement for a year or two to help boost your savings. Once you retire, you might choose to work a part-time job so your retirement savings have the potential to continue growing.
Because retirement is a new experience, it’s uncharted territory. It can be a good idea to seek the assistance of a financial professional to help reduce the risks of outliving your savings.
"For example, it's very common for new retirees to take out too much too soon," Kocak says. "But you need to carefully manage withdrawals to help your savings last."
A financial professional can go over your options, including helping you develop a retirement budget that can help you live within your means.
Your plan for retirement may include delaying Social Security benefits to increase the amount you receive, or you might invest a portion of your savings in an annuity product to guarantee an income stream throughout your later years.*
Adjust your expectations.
If you’re unable to save enough for the retirement you envision, you might need to reset your expectations.
"Some people think they make up for lost time by investing differently as they near retirement, but that's not as prudent of an approach," Kocak says. "It's better to reset expectations, such as retiring at 67 instead of 65, or going out to dinner 2 rather than 3 times a week."
To help you stay on track and reduce the chance for financial surprises, review your plan for retirement at least annually, or as significant events occur before and after you retire.
* Guarantees are based upon the claims-paying ability of the issuing insurance company