We spend so much of our lives working hard and trying to save up enough of a nest egg to last us through our golden years. But exactly how much money is that? If you’re a pre-retiree and find yourself asking, “How long will my retirement money last?” . . . you’re not alone.
A recent study by Gallup found that “Non-retirees’ outlook has been consistently lower and subject to swings based on the national economic climate.”1 Overall, the study found that only 43% of nonretired Americans believe they will retire comfortably while 77% of actual retirees are currently living comfortably in their retirement.2
How To Make Your Retirement Savings Last
Here are some ways to help you get retirement-ready now so you can make your nest egg last during your golden years:
1. Pay off your mortgage before retirement.
One of the ways you can make your retirement savings last is by paying off your mortgage early. Not having a mortgage payment will go a long way in helping you make your savings last.
2. Live on less than you make.
It’s important to create a monthly retirement budget and stick to it and live on less than you’re paying yourself from your savings each month.
3. Say goodbye to debt.
Make a goal to pay off all credit cards, medical debt, and other debts before you retire. That way you can keep more of your money where it belongs: your pocket.
4. Implement a withdrawal strategy.
There’s wisdom in finding a withdrawal strategy that will help you keep your retirement savings around for the long haul. Utilizing the 4% rule, delaying your social security benefits, and considering a fixed annuity may be beneficial for you.
Withdrawal Strategies to Make Your Retirement Savings Last
The best retirement withdrawal strategy is the one that works for you! You could use a safe withdrawal rate calculator or you could implement a withdrawal strategy. Here are some common strategies that will help you make your retirement savings last:
The Required Minimum Distribution (RMD) Strategy
This strategy takes the legal RMD into effect and capitalizes on it. Required minimum distributions kick in on most retirement plans once you turn 73 years old. The amount of withdrawal required is specific to your account and life expectancy. Visit IRS.gov to learn more.
The 4% Rule
The 4% rule is one of the more conservative withdrawal strategies out there. Here’s how it works: the first year of your retirement, you’ll withdraw 4%. In the second year, you’ll withdraw 4% plus inflation. You’ll continue this every year throughout your retirement. The goal with the 4% rule is to last you at least 30 years.
Vanguard and Guyton-Klinger are two well-known dynamic strategies. Both of these strategies are great for retirees looking for some spending freedom in their first year of retirement. But depending on which dynamic strategy you implement, the percentage withdrawn after the first year will be based on the economy and the current state of the stock market.
The Bucket Strategy
The bucket strategy focuses on timing of investments and needs rather than on a certain percentage. Investments are organized based on the income you’ll need within the first three years. The next bucket will support you in years four to six. The third bucket will be for years seven to nine. And the final bucket is for funds you won’t touch until after your first 10 years of retirement. How you decide to treat your investments in each bucket is based on the amount of time they’ll be sitting there.
There are so many different strategies out there to help you make your retirement savings last. Remember, the best strategy for you is the one that helps support you throughout your golden years. So, if you’re in your pre-retirement years, now is the time to start planning out your dream retirement with a trusted financial advisor.