There 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? Here are some ways to stretch your retirement income:
Using the 4% Rule
A common 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?