Surveys regularly tell us that the No. 1 worry among retirees is that they will run out of money while they still have several years of life — and bills — ahead of them.
It would be nice to say their concern is unfounded, but unfortunately many of them are right to worry.
These days, more and more retirees need to rely largely on personal savings, a big change from a generation ago when those entering retirement could count on pensions, along with Social Security, to provide an income stream for the rest of their days.
Knowing this gave those who were retired time to relax at the beach or get in a few extra sets of tennis, while sleeping well at night knowing they had steady income at their disposal.
Today, too many retirees lie awake at night tossing and turning, anxious about how they’ll manage to meet their monthly expenses.
If you’re like most people these days, it’s unlikely you’ll retire with a pension from your workplace, which means you’ll need to consider creating one for yourself.
One way to do that is annuities. An annuity is a contract between a buyer and an insurance company. You pay the company up front, and in return receive regular payments that can stretch out over your lifetime.
I like to think of it as “sleep-well-at-night” insurance.
Of course, what works great for one person might not be the best answer for another, so blanket advice isn’t always possible. But some advice does apply to nearly everyone, and here are a few suggestions that should help you better prepare yourself for retirement and avoid some of those sleepless nights:
Don’t procrastinate. Unfortunately, some people put off planning until it’s too late, or nearly too late, to put themselves in a good position to create a lifetime stream of money.
The last thing you want to do is reach a point of no return where even the best financial professionals aren’t going to be able to do much to help you.
So now is the time to start learning such things as the best ways to maximize your Social Security and how you can make the most of the retirement savings you’ve been stashing away for years.
Figure out your estimated retirement costs. How much are you going to spend each month in retirement? People often assume their expenses will go down, but that’s not always the case. As you age, health care issues alone can create added expenses you weren’t counting on.
In addition, many people plotting out their retirement don’t take into account two very real factors — taxes and inflation. Taxes aren’t always easy to predict, but there’s a good chance they will rise over the course of your retirement. And the cost of living almost certainly will rise.
Let’s say you just retired at age 67 and you head to the grocery store, where cashier tallies up your bill and it comes to $100. Now fast forward through 20 years of retirement and you are 87. It’s likely that $100 is going to buy you a whole lot less than it previously did.
Be prepared for a retirement that could last for decades. Medical advances have helped increase the life expectancy for the average American and that’s great. This means you potentially could have more years to travel, play with the grandkids and read those classic novels you never got around to reading.
But even that good news comes with a downside. The longer you live, the greater the odds you could run out of cash, so don’t underestimate just how long it is you’ll need to make your money last.
Of course, if you start looking over your financial situation and don’t care for what you’re seeing, there are options beyond tossing and turning. For example, maybe if you put off retiring just a few more years you’ll be in better financial shape. Maybe you can work part-time in retirement and that will be enough to make up for your shortfall.
Ultimately, your goal should be to get a better handle on how to make your money work for you in the most efficient manner. Then you can stop worrying about running out of money and just worry about whether you’re in good enough shape to run with the grandkids.
Richard Paul is the president of Richard Paul & Associates, LLC and the author of “The Baby Boomers’ Retirement Survival Guide: How to Navigate Through the Turbulent Times Ahead.” He holds life and health insurance licenses in Michigan and Florida and is a Certified Financial Planner, Registered Financial Consultant, Investment Adviser Representative and insurance professional.
[The content provided through this article and www.nydailynews.com should be used for informational purposes only and is not intended to be a substitute for professional advice. Always seek the advice of a relevant professional with any questions about any financial decision you are seeking to make.]
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