Two things most people care a lot about are their money and their health. They usually don’t give much thought to their health until they lose it. So, in general, it’s the money. The bad news is that in retirement, we get to focus on both.  

The biggest worry we have in retirement is running out of money. This worry is understandable because as we age, we inevitably get to a point where we can no longer work or no longer want to work. If we still need cash, we have a severe problem. The majority of Americans are woefully unprepared for this event. A recent survey found that 40% of older Americans’ only source of income is from their Social Security during retirement. Here are a few ways to be sure to retire with enough and make what you save last longer.

retirementHow much do I really need?

As a simple rule of thumb, when you retire, you want to have a stream of income that is at least 90% of what you were making in your last year of full-time work. The idea is that you will be spending about 80% of your previous year’s budget during retirement. With the 90% rule, you will be able to account for taxes and inflation. This rule does make the critical assumption that you will not be increasing your spending in retirement, which some people do when they decide to buy an RV, boat, condo at the beach, or a trip around the world. These kinds of discretionary purchases can throw your numbers out of whack quickly. It also assumes that inflation stays as it is and does not count your social security in the calculation.

So how can I make what I have last longer?

  • Make your Investments work – in this era of chronically low-interest rates, very few people will accumulate enough assets to live off guaranteed investments like Government bonds and CDs. Contrary to conventional wisdom, most people approaching retirement will be forced to have a far more aggressive investment posture than previously thought. This is probably the most important decision you can make. Find an investment advisor who knows how to make you money- and you trust. Do your due diligence. You cannot afford to make mistakes at this point in your investment horizon.
  • Create a Budget (and Keep to It) – When working, you set up a budget to save for retirement; however, now we need to do the same for your retirement. If you know your income stream and expenses, you can determine what you can spend each month and keep to that amount. Plan on a minimum $1000 emergency every year, and if you don’t have an emergency, then save the $1000 for a $2000 emergency next year. Keep saving an emergency fund until you reach at least $4000 in savings as 25% of households have an emergency each year, with an average cost of $3500. This way, you can be sure that you can be prepared for whatever can happen in the future.
  • Reduce your fixed expenses – Anything that you can