If you ask people what concerns they have about retirement, many will likely point to health issues cropping up. But there's another concern that tends to plague retirees, and it's running out of money.
The unfortunate reality is that there's no 401(k) or IRA balance that guarantees that your money won't run out. You could whittle a $3 million nest egg down to $0 if you aren't careful enough.
But there's also some good news. There are steps you can take to lower your risk of depleting your nest egg in your lifetime. Here are a few worth incorporating into your retirement plan.
Image source: Getty Images.
1. Work longer
Americans are living longer these days. And financially speaking, that's a challenge, even though it's otherwise a good thing.
You might think you'll need your retirement savings to last 20 years if you retire in your mid-60s. But you may end up being blessed with great health that has you living until your mid-90s.
If you're concerned about running out of savings, consider extending your career, especially if you're reaching your planned retirement age and are finding that your health is in great shape. It's also worth extending your career if you still enjoy what you do or your job isn't particularly stressful. The longer you wait to first start tapping your savings regularly, the less likely you may be to have that money run out.
Also, you may not have to continue in your existing career if you're fairly burned out but want to keep working to leave your nest egg intact longer. You could try joining the gig economy and doing something more interesting that might pay less than your current job but just enough to cover your bills.
2. Work with a financial advisor to establish a safe withdrawal rate
Randomly withdrawing funds from your savings is a good way to increase your chance of that money running out. Instead, work with a financial advisor to land on a safe withdrawal rate for your nest egg. That should hinge on factors that include:
- Your expenses
- Your retirement age
- Your different retirement income sources
- The way your savings are invested
Of course, you could also go it alone and try to come up with an optimal withdrawal rate on your own. But working with a professional might give you more confidence in your approach to tapping your savings, and that's important for your peace of mind.
3. Delay your Social Security claim
The more money you get from Social Security each month, the less reliant you might be on your savings. So if you're able to boost the monthly benefit you're entitled to, it could result in smaller withdrawals from your IRA or 401(k).
You're entitled to your full monthly Social Security benefit, based on your personal income history, once you reach full retirement age, which is based on your year of birth. But if you delay your claim past that point, your monthly benefit will get an 8% boost for each year you do, up until age 70.
If you don't like the idea of waiting until 70 to collect Social Security, don't. You could, instead, delay your filing just one year for an 8% boost. That alone could help lower your chances of depleting your savings since you conceivably won't have to take as much out of your retirement account if you're getting more from Social Security.
It's natural to be scared of running out of retirement savings. But if you utilize these strategies, you may find that your money will last as long as it needs to.
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