Building retirement savings is easier said than done. It takes a lot of effort and discipline to consistently fund an IRA or 401(k) plan. But if you keep at it, you may end up retiring with a nice sum of money socked away.
But accumulating retirement savings is only half the battle. Once you enter retirement, you’ll need to make sure that money doesn’t run out on you. And that’s a major concern among Americans today.
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In fact, 51% are worried about outliving their savings, according to a recent Northwestern Mutual survey. And if that’s something that scares you, it’s important to take steps to avoid that fate. Here’s how.
1. Establish a safe withdrawal rate
If you start taking money out of your retirement savings at random the moment you stop working, there’s a chance you could end up running out. A better bet? Establish a safe withdrawal rate based on that factors that include your age at retirement, your life expectancy, and your investment mix.
For years, financial experts have touted the 4% rule, which allows you to remove 4% of your savings balance your first year of retirement and adjust future withdrawals for inflation. The 4% rule may or may not work for you, though, based on the factors above. If you’re worried about choosing the wrong withdrawal rate for your savings, it could pay to sit down with a financial advisor and figure things out together.
2. Load up on income-generating assets
The more income your portfolio is able to produce, the less likely you are to run out of retirement savings. To that end, aim to load up on assets like dividend stocks, which could offer the benefit of not just share price appreciation, but the potential for quarterly income.
Another smart retirement investment worth considering is municipal bonds. Not only do they offer the upside of guaranteed interest income, but that interest is always federally tax-exempt. And interest paid by municipal bonds issued by your state of residence gets to enjoy tax-free treatment at the state and local level, too.
3. Work part time for extra money
Many people associate retirement as a time to stop working. But bringing home a paycheck is a great way to take the pressure off of your savings — and help stretch your nest egg further.
On top of the extra income, you may find that working during retirement is something you enjoy, especially if you manage to find a job where the work is meaningful or the people are nice. And remember, if you don’t like the idea of being tied to a schedule, there’s always the option to participate in the gig economy.
4. Delay Social Security for larger benefits
If you were born in 1960 or later, you can collect your monthly Social Security benefits without a reduction at age 67, which is full retirement age. But for each year you delay your Social Security claim beyond that point, up until you turn 70, your monthly benefits get an 8% boost.
The more money you get from Social Security each month, the less you should have to tap into your nest egg. So if you’re able to wait to file for benefits, you can set yourself up to stretch your savings even more.
It’s natural to worry about running out of retirement savings — even if you have a nice amount of money socked away. But these moves could help you avoid that unwanted outcome and enjoy more peace of mind throughout your retirement years.
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