Sanchione: An expert’s guide to making retirement savings last


In recent months we have seen inflation increase at rates challenging to most households.  Retirees are searching for ways to make their retirement savings last as long as possible.

Rather than start by recommending folks give up that daily expensive coffee, one of my top recommendations is to work with a financial advisor you trust.  This can be a key person to your retirement success.  They can help you remain objective and, if appropriate, stick to your plan when you are having emotional reactions to the market volatility during your retirement years.

They can also help keep you, your spouse, and your family on track towards your broader financial goals over the course of your retirement and each life event that comes along with it.   The items below are the types of topics you and your financial advisor can talk through and determine what is best for your individual situation.

For those not yet retired:

  • Consider carrying as little debt into retirement as possible. Reducing those ongoing expenses helps reduce how much they erode retirement savings.
  • Consider delaying retirement. Even just one additional year of income can boost total retirement savings measurably.
  • Consider delaying your social security benefits. Waiting until a later age can mean a significant increase in your monthly benefit.

For those in retirement:

  • Make sure you know what your total retirement savings and monthly income equal. Do you have a pension?  Did you invest in an income annuity?  Be sure you have a proper inventory of your retirement assets.
  • Make sure you know your retirement asset mix. Is it too risky or too conservative?  Often, neither extreme is a good approach.  Do have some level of guaranteed income (like social security, pension, and annuity payments) to cover your need-to-have expenses such as housing, food, and healthcare?
  • Make sure you know what you are spending each month. Sounds simple, but for many people, they lose track of what they are actually spending.  Categorize the “Need-to-Have” from the “Nice-to-Have.”  Need-to-Have expenses, such as housing, food, and healthcare, should generally be covered by guaranteed income sources (more on that a couple of bullets down).
  • Is your spending sustainable over your expected length of retirement? Not even the best financial advisor can predict someone’s length of retirement, but the 4% Rule is often a fair starting point to cover a 30-year retirement span.  Credited to William Bengen, the 4% Rule guides newly retired individuals to withdraw 4% of their savings in the first year of retirement.  Then adjust that withdrawal rate each year based upon inflation.  Doing so is a potential way to help your retirement savings last for 30 years.  4% is just a guide.  You may find a different percentage to be best for you.
  • Manage your expenses by considering the following:

o  Downsize your housing.  Smaller housing usually means smaller related expenses.  You may also benefit by capturing some equity and discussing with your financial advisor about putting it to work for you in other ways.

o  Downsize your transportation expenses.  Smaller cars can be more fuel efficient.  Fewer cars may even be possible for you.  Less expense on insurance, gas, car payments.

o  Downsize home energy spending.  Have you switched over to LED light bulbs?  Do you have a smart thermometer?

o  Reevaluate all of your insurance coverages.  Are you paying for levels of coverage that you no longer need?

These can be just the beginning.  As you take a closer look at your retirement finances, other ideas may also surface.  Keep an eye on both income and expenses in retirement so you can make adjustments more quickly.

 

Mark Sanchione is the chief banking officer for Ridgewood Savings Bank.





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