What are some of the most effective ways to make your retirement savings last?

Retirement planning is a complex and often misunderstood topic. Many people have misconceptions about what retirement should look like, especially if they haven’t taken the time to learn about the realities of retirement or have no plans.

Retirement Challenges ahead

You must understand common retirement myths to ensure you’re on track with your retirement goals. In this article, I’ll explore some of the more common retirement misconceptions that most people believe—and why they are wrong. I will also look at actionable strategies proven to improve retirees’ odds of retiring successfully. When you read this article and grasp some retirement essentials, you will be better equipped to make sounder decisions about your future financial security.

Understand that retirement will be more challenging in 2023 and beyond.

Americans are living longer and healthier lives. Many of them are also working later in life. The average retirement age has slowly advanced in the last decade. It’s not uncommon for people to work well into their 60s or even 70s.

However, this trend may reverse in the coming years as the last of the baby boomers retires, along with early Gen-Xers. Since all post-World War II generations are smaller than the Baby Boom generation, there will be more retirees than workers to support them. As you can imagine, this demographic shift will strain Medicare, Social Security, and other retirement programs.

When more people leave the workplace and fewer people stay, the economy is bound to experience turbulence. Worse, as much as 70% of American seniors have not saved enough money to retire. Many either do not have any retirement plan or have not set aside enough in their accounts.

There will be less money available for healthcare, education, social safety nets, and infrastructure. Interest rates may rise as the government encourages more people to save for retirement. These factors create a perfect storm of challenges for those approaching retirement in 2023 and beyond. Most people are unfortunately not prepared to ride out the coming economic storm.

Retirement Mistakes can be costly.

Are you making these common mistakes in your planning?

You’ve probably heard you should start saving for retirement as soon as you start your career. And while that’s good advice, there’s much more to think about than just how much money you’ll need to set aside. There are other crucial factors to consider, such as when you want to stop working and how you’ll spend your time when you leave the workforce.

A common mistake many Americans make is retiring too early. People who retire early do so for many different reasons. Some are simply burned out and tired of commuting to jobs they don’t like. Many people feel their jobs have consumed valuable time they’d rather spend with their families or friends.

Increasingly, people who originally intended to retire later in life discover they can no longer work due to health issues or having to care for elderly relatives. Regardless of the reason, retiring too early can create multiple challenges, including financial hardships and increased stress.

Pre-retirees who want to leave their jobs as soon as possible should understand that they may need to plan for a longer retirement than envisioned. According to the Social Security Administration, the average life expectancy for someone who reaches age 65 is now almost 20 years. If you retire at age 65, you could spend more than a third of your life without a paycheck.

Many seniors I know shrug off what we in financial services call “longevity risk.” They believe they can make a few tweaks when the time comes, downsizing their lifestyles and living off their savings and Social Security benefits. But that may not be realistic. Look at the economy right now. Prices for everything from eggs to energy have risen incredibly. Such spikes in the cost of living are probably not temporary and could last well into retirement. Taxes will also likely increase as we get older, not go down. Even if you have a decent nest egg saved up, it may not last as long as you think it will. So, is there anything you can do to help ensure your retirement savings will last as long as you do?

Some tried-and-true methods of making money last longer.

Save as early and as much as you can. In my opinion, it’s never too soon to think about not wanting or being able to stay at your job. However, saving now is critical if you’re within ten years of retirement, even if you are experiencing cash flow issues that make saving difficult.

Retirement Plan from Apex Financial Group

Another way to ensure your retirement savings last longer is to have a plan and stick to it. Easier said than done, I know. However, when I encounter those struggling to build nest eggs or experiencing hardships in retirement, I discover that virtually all of them failed to design and implement a solid income plan.

Now’s the time to carefully review your expenses, balance your portfolio, make any necessary adjustments, meet with an advisor, and clarify your money goals. Do you know what you want your money to do? Do you know how much income you’ll need to accomplish your objectives? Most pre-retirees I know vastly underestimate just how much money they’ll need to enjoy a decent lifestyle once those paychecks stop coming in. They also often forget how critical it is to achieve a level of diversity in their investments so they won’t be as negatively impacted during market downturns.

You can further protect your retirement savings by purchasing long-term care insurance or annuities. Unexpected expenses in retirement, such as medical issues, can devour your cash instantly. Insurance and annuities can help create emergency savings and help prevent the accelerated depletion of your retirement accounts.

Finally, once you’re ready to retire and start spending down your savings, you should be mindful of how you withdraw from each of your retirement accounts. If you take out too much, you might deplete your savings more quickly than you’d planned. Consult with a financial advisor and review your spend-down strategy before making any withdrawals.

Ken’s Takeaways: Preparing for retirement can seem like a daunting task. However, partnering with a retirement income specialist and following a few common-sense tips can help ensure your hard-earned savings last throughout your golden years. Even if you already have an advisor, you’ll benefit from having another set of eyes review your retirement blueprint. Contact me today, and I will be happy to look at your portfolio design and give you an honest second opinion.

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