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3 Ways to Avoid Going Broke in Retirement

Although retirement tends to be a period that people look forward to, it can also be filled with financial stress. Many people find that they’re not privy to as much income in retirement as they were during their working years. And in a scenario like that, it’s easy to see how you might worry about going broke.

The good news, though, is that with careful planning, you can do your part to stretch your retirement savings and live reasonably well on a lower income. Here are some moves worth making to that end.

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1. Have a budget from the start

Any time you’re looking at having to live on less income, it’s important to follow a budget that outlines your expenses. So at the very start of retirement, sit down to create that budget. Make sure it accounts for your mandatory expenses, like food and housing, as well as discretionary expenses, like TV and entertainment.

That said, just as unplanned expenses can pop up during your working years, so too can that happen during retirement. So it’s a good idea to pad your budget for things like home or car repairs, just in case.

2. Delay your Social Security claim

The nice thing about Social Security is that it’s designed to pay you a guaranteed benefit for life. So the higher that benefit is, the more financial flexibility you’re apt to have. That’s why it could pay to delay your Social Security filing until age 70.

See, you’re entitled to your complete monthly benefit based on your wage history at full retirement age, which is either 66, 67, or somewhere in between, depending on your year of birth. But for each year you delay your filing past that point, up until age 70, your monthly benefit gets to grow 8%.

As an example, let’s say full retirement age for you is 67, at which point you’re looking at a $1,600 monthly Social Security check. If you delay your filing by one year, you’ll boost that benefit to $1,728. Wait until 70, and you’re looking at $1,984 a month instead.

3. Reduce your largest expenses

If you’re convinced money will be tight in retirement, it definitely pays to try to lower some of your larger expenses. That could mean downsizing to a smaller home, or unloading a second vehicle if you’re married and you and your spouse can manage with just one.

Another thing you may want to consider is relocating to a part of the U.S. that’s less expensive than where you currently live. It’s one thing to stay in an expensive zip code because it gives you access to great schools for your kids and puts you close to higher-paying jobs. But if you’re no longer working and have grown kids who fled the nest long ago, then you may want to pack up and more somewhere more affordable.

It’s natural to worry about money as a retiree. But if you make these moves, you may find that you’re able to get by quite well financially, even if you don’t have nearly the same annual income you did during your career.

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