If your worried that your money won't last your entire retirement, you're not alone! – especially living in Newport Beach, California and the surrounding areas. According to a recent Forbes article, 48% of Americans have NO retirement savings at all. As of 2018, the average 65‑year‑old man can expect to live to about age 84 and age 86 for women.
At least one member of a married couple is expected to live to age 90. That means many retirees will have even more time to enjoy the next chapter of their lives. But there’s a downside, more pre-retirees and current retirees are concerned they'll outlive their money. Nobody wants to be in that position.
You can take solace by acknowledging that retirement does not signal the end of your ability to invest. Emily Guy Birken, author of Making Social Security Work for You: Advice, Strategies, and Timelines That Can Maximize Your Benefits says "We tend to think about saving money as something we do only while working, but your money can still work for you in retirement.” If you retire at 62 and live for 30 more years, that's 30 years of growth potential for your investments.
Create Your Plan
To maximize your money, think about your retirement portfolio as having three different buckets. Planning this way can help ensure that you'll have what you need for as long as you need it.
The first bucket is for the first 5 years of retirement. It is earning interest, but is in a safe investment spot, so you don't have to worry about stock market fluctuations and volatility.
The second bucket is for years 6 through 15 of retirement. It should also be relatively safe and earning interest – growing your money.
The third bucket is for a longer time frame — year 16 and beyond — so you can afford to be a bit riskier, since you have more time to let that money grow.
Keep in mind that the markets always have some element of volatility, so you may want to consider adding an annuity or Indexed Universal Life (IUL) to your financial strategy as well.
Annuities offer protection from downside market risk and can provide you with a guaranteed stream of income for life.
An IUL can offer downside protection as well, a death benefit and tax-free income at retirement.
Think of your plan as getting an "income” for as long as you live. You also have the freedom to use the money any way you like, from taking care of your essential needs to pursuing other retirement goals and dreams such as family and traveling.
Live now as you plan to in your future
Another way to ensure that your money lasts throughout retirement is to start living now as if you are already retired. This will help you set a realistic retirement budget and give you plenty of time to make adjustments to your financial plan before you actually retire.
We recommend looking at your big item expenses, such as housing, transportation, and health care. The housing market in Newport Beach and surrounding areas is expensive, you might consider selling your home and downsizing to a smaller place, especially if your home is already paid off.
As you can imagine, healthcare costs as you get older can become expensive in Orange County, so be prepared for upcoming expenses. If there are changes you see yourself making in retirement (like downsizing to a townhouse or becoming a one-car household) that you can realistically make early, go ahead and implement them.
You'll not only save money that you can funnel into your retirement accounts, you'll ultimately set yourself up for a happier, more satisfying retirement. Give us a call to help you with your plan!