Financial Planning for Retirement: The Best Ways to Avoid Running Out of Money in Retirement | The Real Asset

 The pandemic has plagued many people’s economic lives, affecting their ability to save and disburse cash for retirement. Add to this the fact that more Americans are living longer, and for many, the prospect of financial security in retirement is getting shorter.

But if you're worried about running out of money in retirement, you're not alone.

''successful retirement is about planning expenses and making sure that spending plans include inflation and health care costs''.

Here are the steps you can take to avoid running out of money in retirement.

Start Planning Now

It is not too late to start planning. Although it is impossible to know how long you will live or what your future health will be, there are some things you can plan for now that can set you up well for retirement.

"Unfortunately, many people wait until they are ready to retire to start planning for retirement." "Decades before you retire, you should start evaluating your numbers."

Figure out what age you plan to retire, how much you save, what your estimated expenses are, how much income you will need to live on, and how much you have already saved for retirement.

Wenzel suggests evaluating your estimated Social Security payments to gain a better understanding of how much you will contribute to your retirement income goals.

Keep in mind that those estimates will be different when you start collecting Social Security payments.

"If you're planning to retire from your mid-60s, you're really planning to live well into your 80's and 90's - especially for women."

Save As Much As You Can

The sooner you start saving, So much you will keep increasing your money

In your younger years, even a small amount of savings can go a long way. The longer you wait, the more you will need to set aside to meet your goals. So it’s always a good idea to try and keep as far away as you can.

Most experts suggest savings anywhere between 10% and 15% of your total salary, including the contributions you receive from your employer.

But the bottom line is that you can save whatever you can, even if it’s not the full 10% of your income.

"No matter what your income or savings levels are, having a real financial plan can help maintain your financial security during all stages of retirement,".

Invest The Money You Save

But it doesn’t stop there. Don't forget to invest the money you save. Combined interest can work wonders for your money. Like savings, your money will grow as soon as you start investing.

Make sure you are putting your savings in a tax-exempt retirement account such as an employer-sponsored 401 (k) plan or personal retirement account, or IRA. Some companies make contributions matching 401 (k) plans, in which case you make sure you are contributing enough to achieve a full employer match.

But 401 (k) and IRA are not the only ways to save for retirement. Health savings accounts, or HSAs, and other tax-benefit accounts can also help you reach your retirement fund goals.

"You want to keep money in different places to make sure you would not run out of money in the end,".

Another place to invest some of your money, which can guarantee that it will not run out is an annuity. annuities are a type of investment that is usually issued by an insurance company and can provide a steady stream of regular payments that are financial. Not influenced by the markets and lasts a lifetime.

There are different types of annuities that you can buy to suit certain needs. But some of them come with hidden costs, such as higher commissions, annual fees, or surrender on initial withdrawals.

A traditional annuity, also known as a fixed-rate annuity, offers a fixed interest rate on your money for a fixed period of time - often for the rest of your life. Fixed-rate annuities usually have no annual fees and lower commissions than any other type, but there is a penalty for an early withdrawal of 10% before retirement.

Build Good Habits

Controlling your spending can also help increase your savings. Take some time to set a budget and stick to it. You may also want to make sure that you have emergency funding for any unforeseen circumstances, such as a medical emergency or job loss. Most experts suggest saving at least three to six months of living costs.

Wenzel notes that your retirement costs won't change much compared to your pre-retirement years - so budgeting, investing, and mastering emergency financing in a good financial habit, helps you when you got to retire.

Get Rid Of Debt Before You Retire

Carrying a significant amount of debt in retirement consumes your hard-earned cash. Not to mention, many debts, such as credit cards and student loans, can come with high-interest rates.

Try to reduce or eliminate debt before you retire. Can free up more cash towards savings. Once you repay the loan, you can redirect those payments to your retirement account.

Debt-free financial advisors can help you with both retirement planning and debt repayment strategies to ensure you retire. Or maybe you plan to save money and buy a bigger item to meet your debt, work longer or reduce it like a house or a car.

Don't withdraw too much or too early

Withdrawing from your retirement savings too soon can have detrimental consequences. You may be subject to an initial withdrawal penalty or you may even lose tax benefits.

The current IRS penalty for withdrawing funds as early as 401 (k) is 10% plus your income tax rate on the amount you withdraw. Remember, the money in your retirement account is for your retirement. So avoid the temptation to pull out of those funds before your expected retirement age.

Once you retire it will pull back a lot. The general rule of thumb is to follow the 4% rule, which means you withdraw 4% of your retirement savings each year (adjusted for inflation). The idea is that you can usually expect a return of at least 4% on your investments so that you do not lose money during your 30-year retirement.

However, that number is not set in stone. If you have a large egg structure, some experts suggest a slightly higher withdrawal rate between 4.5%% or between% - but not more than 5%. While others suggest a more consensual approach - withdrawal rates anywhere between 3% or 3.5%.

"It depends on the person," Stiger said. "Keeping it low is the biggest driver of a successful retirement or fundraising."

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