More Ways to Stretch Your Retirement Income


stretching retirement incomeThere is plenty of information out there about how to save for retirement.  We all understand that we need to save for retirement and the many options available.  Where the information lacks is when it comes to retirement income.  Once you retire, how do you make sure that you live comfortably throughout?  Brought to you by Genworth, here are some ways to stretch your retirement income.

Using the 4% Rule

The rule of thumb for withdrawing funds from your retirement account is four percent.  This has been shown to be a relatively sustainable percentage.  This is a good rate because you can essentially survive off the interest and dividends earned by your retirement investments.  With only withdrawing 4% of your account balance plus an amount to cover inflation, you should be able to  keep your income flowing for 30 years.

Think About Downsizing

The easiest way to stretch your retirement income is to downsize your life and be content with less.  One of the best ways to downsize are to move to a smaller house.  Along with downsizing the house, one should also focus on reducing the cost of living.  When reducing the home size, think about an area where the cost of living is much lower.

When you downsize, you should also start thinking about being content with less.  For things that you need to buy, make sure to take advantage of the many senior discounts available.  You can get a large range of products and services at a “senior” discount. Just make sure to ask.

Grab Your Buckets

One retirement income strategy that has been gaining popularity over the last couple of years is known as “bucketing”.  The key to this strategy is for retiree’s to bucket their investments into different risk portfolios designed to provide for income needs at different time periods in retirement.  In the first 10 years of retirement, money is stashed away in conservative and stable investments to ensure that retirement income will be there. For the next 10 years, choose a moderate investment mix of 70% stocks and 30% bonds. A well-diversified portfolio should include a mix of large, mid, and small cap stocks along with an appropriate amount of international stocks. Retirees can be aggressive with the last bucket for funds that won’t be needed for at least 20 years.

The bucket strategy is all about diversification using the different buckets and rebalancing between each bucket is necessary to maximize gains and minimize portfolio risk.

More Ways To Stretch Your Retirement Income

While the above tips are great ways to stretch your retirement income, they are not the only ones..  Each person’s situation is different, so different retirement planning strategies will provide different results.  Depending on your exact situation, you may need to think about delaying your retirement until you are in a better financial position.  If you are already in retirement and feel you won’t be able to live comfortably off your investments, then you may need to think about getting a part-time job.  In order to keep your social security benefits, make sure you only work up to the $14,160 a year.  If you make more than that, your social security benefits will be cut.

If all else fails, then you might consider a reverse mortgage.  This will provide you with cash coming from the equity in your home.  It is not required to be paid back until the home is sold, you move out permanently, or you pass away.  This should be the last resort as there are large fees associated with reverse mortgages.

Readers: How do you plan on making your retirement income last?

Stay Connected with The Frugal Toad

Subscribe to our e-mail newsletter to receive updates.

, ,

26 Responses to More Ways to Stretch Your Retirement Income

  1. Moneycone 12/16/2013 at 2:37 pm #

    Make living within your means a habit and save even if retirement seems far away. It would be terrible to not have enough during your golden years.

    • Paul 12/16/2013 at 6:59 pm #

      Living within your means is good advice not just for retirement but, as you said, the present. It would be a shame to finance a lifestyle at the expense of a mountain of debt in your later years!

  2. Squirrelers 12/17/2013 at 11:00 am #

    Good post. I think that by doing the math, and thinking about current and future income in the context of expenses, it should be clear to many people that there is a gap between perception and reality. A lot of people live inflated lifestyles that are not sustainable. To a small extent, I’ve been there.

    Really, it’s a matter of stretching one’s dollars by living a sustainable life. At least that’s how I’m approaching it. One thing with the 4% rule, I’ve been reading some people advocating for even less – as in 3% for example.

    • Paul 12/17/2013 at 11:24 am #

      The concept of living within your means is a simple one to understand but for many people difficult to execute. As far as the 4% rule go it is a good starting point and depends upon your rate of return, life expectancy, and finally your lifestyle.

  3. Bryce @ Save and Conquer 12/17/2013 at 12:05 pm #

    Assuming we hit our target retirement savings in 9 years, which looks likely even if market returns are poor, we will only withdraw 2.8% of our portfolio each year. Like the 4% rule, this will be adjusted for inflation in the following years. We will also adjust withdrawals depending on market conditions. If our portfolio is up, we may take a higher percentage out; if it is down, we will take less. This will hopefully last at least 45 years, since my wife will only be 50 at the time we retire.

    • Paul 12/18/2013 at 6:29 am #

      That is great that you have not only saved enough for your retirement Bryce but you have the flexibility to adjust your withdrawal rate based upon market performance. Many people withdraw too much in the early years of retirement and then play catch-up for years!

  4. Crystal 12/17/2013 at 2:19 pm #

    We’re planning on using our stock investments to live on from when we retire (around 45-50) to “normal” retirement age (around 69 1/2). Then we’ll start using my old 401k and our Roth IRA’s.

    • Paul 12/19/2013 at 9:01 pm #

      By selling equal and offsetting gains and losses, you can minimize capital gains!

  5. Michelle 12/17/2013 at 2:36 pm #

    Good post! I want to save a large amount to last us forever, and then to also have passive income so that we are still bringing money in.

  6. Lance @ Money Life and More 12/17/2013 at 7:32 pm #

    If I had to stretch my income, I’d probably downsize my house and my lifestyle. It’d stink, but if I had to do that then I clearly hadn’t planned properly for the future and no one else deserves to pay for that.

    • Paul 12/20/2013 at 7:30 pm #

      Downsizing your home may allow you to move to a location that may be a better fit for your retirement lifestyle, it may also free up some extra cash!

  7. Kim@Eyesonthedollar 12/17/2013 at 9:26 pm #

    I hope we have enough income from our rentals to cover expenses at least until we are old enough to access tax deferred accounts. I think the worst thing would be not to have any plans and have to work until you drop or depend on your children or family to support you if you can’t.

    • Paul 12/20/2013 at 7:33 pm #

      Rental property can be a great way to generate some money for retirement. If you can generate positive cash flow over the long-term, you are way ahead of most landlords!

  8. Caitlin 12/18/2013 at 8:51 am #

    Ugh, I don’t even want to think about retirement (I’m 26)! We’ve already started saving for the future, but we’re focusing more on paying down our debts at the moment.

    • Paul 12/20/2013 at 5:15 pm #

      Depending on the rate being charged on your debt, it may make sense to bump up your retirement contribution and take advantage of a company match and the power of compounding since you are young! I have a mortgage at 3.5% and would never pay down this debt and miss the opportunity to grow my money with equities!

  9. Chuck @ Tortoise Banker 12/19/2013 at 4:15 pm #

    Does the 4% rule you recommend include adjusting it yearly ? Or is it a flat 4% of total portfolio. Thanks!

    • Paul 12/20/2013 at 5:24 pm #

      The 4% rule is not so much a rule as a guideline and is usually adjusted upwards to cover inflation. There are several factors that will affect the withdrawal rate that will allow for the safe withdrawal of funds so that there will be sufficient principle left for out years. For many the 4% withdrawal rate may need to be adjusted downward to ensure retirement funds last.

  10. Tammy R 12/19/2013 at 9:00 pm #

    Hi Paul! I really appreciate you sharing this. We finally woke up about six or seven years ago – well, maybe half woke up. We fully woke up two years ago and got really serious about our retirement savings and investments. Now we are living simply and spending on so much less. We only have one car, no TV, no Internet on cell phones. I know it sounds like we live on Little House on the Prairie, but we live in Houston and run two businesses! We just prioritized and spending the extra money on things that aren’t priorities didn’t make sense to us anymore. We spend very little on clothes although we do eat out on weekends and drink quality beer on Saturday night. I’d rather have a Lagunitas IPA than a Coach purse any day! ;)

    Hope you are enjoying your day!

    • Paul 12/20/2013 at 5:29 pm #

      Hi Tammy! I’m with you on the IPA! Although I’m not quite ready to cut out the TV I no longer subscribe to the movie channels. I find that not only do I save a few bucks each month, I watch less TV and am more active. I’d rather go for a hike with my girlfriend than sit and watch a movie!

  11. Barbara Friedberg 12/21/2013 at 8:44 am #

    Having lived all across the country, my take is that if you are looking to drastically slash retirement costs, live in a low cost of living area. It’s so much more affordable when food and housing costs are low.

    • Paul 12/22/2013 at 9:20 am #

      You are right Barb. With food and housing costs typically being the largest expenditures it makes sense to move to a low cost of living area. Many retirees choose to move to locations that are closer to family as travel expenses can add up quickly!

  12. Felix Lee 12/28/2013 at 12:16 am #

    Thank you so much for sharing this. I am really preparing for our retirement and I do want to save as much as I can, not just for myself, but for the whole family as well.

  13. maria@moneyprinciple 12/30/2013 at 1:13 pm #

    Very interesting! I’ve come across the 4% rule before (it’s hard not to). But John and I designed a calculator that allows for variety of assumptions to be changed. Basically, it all depends on whether one want to leave inheritance or not. If you wish to leave inheritance for your children then try to protect the capital; if not, one can calculate how much they can draw out and not run out of money before they run out of life.

  14. Increase Credit Limit 01/08/2014 at 7:16 pm #

    Another thing I would like to do when I retire is to stretch my income by having more income! What I mean is that I think it would be great to have some type of part-time work that would get you a little more income and keep you busy! As long I am able, hopefully I will be able to do something like that when I do retire.

  15. Tushar @ Everything Finance 01/12/2014 at 9:15 pm #

    I’m working very hard to ensure that I won’t have to make my dollars stretch that far. I am saving as much as possible to max out my retirement accounts. I do think we’ll downsize, though, once we retire. Who needs a huge house?

  16. Marissa@Thirtysixmonths 02/06/2014 at 7:06 am #

    One of my motivation in working hard is to have a secure future where no worries financially, Your tips Paul is a big help for people like me who aims to stretch their retirement income.

Leave a Reply