Making Money Last in Retirement
You’ve no doubt done your part for retirement. You’ve saved well, contributed to a 401 or other retirement plan, and done all you can to financially prepare for your retirement years. Congratulations!
And yet, with inflation and cost of living ever on the rise, not to mention modern healthcare costs, making money last in retirementis more important than ever.
Good news there: stretching your retirement savings isn’t nearly as challenging as you might think. There are some highly effective methods to keep your retirement budget in the green so that you can enjoy the retirement you’ve always dreamed of.
Here are 6 great strategies for making money last in retirement.
1. The 4% Rule
One popular guideline for saving money during retirement is the 4% rule. Coined by financial advisor William Bengen, the 4% rule is a strategy for investors during retirement. If investors withdraw 4% of their savings during the first year of retirement and keep withdrawing the same amount adjusted for inflation each year, their savings can usually last 30 years.
There are certainly exceptions to the 4% rule and adjustments should of course be made on a case-by-case basis. This rule can be a good general guideline, but be sure to consider inflation, market changes, or any emergencies you may encounter. And certainly always consult your own financial planner if you have one.
2. Long-Term Care Insurance
Long-term care insurance is an insurance product that helps pay for the cost of long-term care. Because such health costs can cut into retirement savings, paying for LTC insurance can help make your money last in retirement.
Many insurance companies offer life insurance with LTC insurance, which provides your beneficiaries with a death benefit if you don’t end up using some or all your long-term care benefits.
3. Fixed Annuity
An annuity is an insurance product that guarantees a fixed rate of return to provide retirees with a stream of income. You can purchase fixed annuities with a lump-sum of money from retirement assets, or in smaller payments over time.
The annuity provider gives you income payments for a set number of years based on your age, account balance, interest accumulated, and other factors. Some annuities let you opt for death benefits, which can pass some of the annuity’s income payments onto your beneficiaries.
4. Downsize Your Home
You’re likely living in a home that you purchased decades ago, one that was big enough to hold an entire family but now is more like an empty nest. You’ve likely got great memories attached to your home, but you’re also paying for those memories through high maintenance and upkeep costs – and let’s not forget property tax payments!
It may be time to reduce your footprint by downsizing to a home with smaller square footage. Living accommodations that you would find in a retirement community setting, such as an apartment, a semi-detached home, a cottage, or even a modest detached home are all great options that allow you to only pay for what you need, and put the rest into living your best life.
5. Relocate to an Area with a Lower Cost of Living
Another great way to ensure you make your money last during retirement is to relocate. Pulling up tent stakes so you can relocate to an area where the cost of living is generally lower also increases your overall budget.
It doesn’t even have to be a major move – going from the city to the suburbs can help drop your cost of living, as can moving to a neighboring state from a more expensive one. Combine this with downsizing and you’ll see that nest egg of yours last all that much longer.
6. Move Into a Retirement Community
There’s a great way to combine both downsizing and relocating to help with your retirement costs. A retirement community often offers the best value for money, and because there are so many different types of retirement communities out there, you’re almost guaranteed to find one that has the perfect balance of amenities and accommodations for your lifestyle.
Retirement communities help you save money by combining nearly all your living costs into a single monthly fee. This fee typically covers lawn maintenance and landscaping, repairs to the home, and often even utility bills.
Additionally, you also gain access to community amenities like clubhouses, fitness centers and swimming pools. Moving to one of these communities helps you do anything and everything you want during retirement. Here are a few different types.
The Independent Living Community
Independent living communities are often in gated neighborhoods of townhomes or cottages, surrounded by gorgeous landscaping and great amenities for residents both indoor and outdoor.
These communities offer residents the most independence but often don’t offer services that some other types of communities do, such as advanced healthcare options.
The Assisted Living Community
Assisted living communities fill the healthcare gap created by independent living communities, providing the care you or a loved one might need to live a full and healthy life.
Residents with healthcare needs that require daily nurse visits or home health aides are part of the services these types of communities offer. As such, they aren’t your typical retirement environment — they are for someone who truly needs the daily living support.
The Continuing Care Retirement Community
Finally, there are continuing care retirement communities. These types of communities provide independent living with the added benefit of a range of health services, and can provide whatever level of healthcare you may need, regardless of whether your healthcare needs change while residing there.
A big advantage of living in a continuing care retirement community is that you don’t need to relocate from an independent living community to an assisted living facility if your health needs change. Instead, you receive the necessary care right on the same campus.
Additionally, some of these communities employ what’s called a Type A Contract, which means your entrance price pre-pays your long-term healthcare expenses at the time of move-in. You pay a one-time entrance fee and then the standard monthly living fee, and should you ever need a higher level of care such as assisted living, your monthly fees will not increase due to that need. This means inflation and cost of living increases have a much smaller impact on your future healthcare costs.
This also means you can potentially avoid long-term care insurance, because you will already be covered should you need long-term care. One of the best ways to make money last after you retire is to know exactly how much you need to have saved. If you don’t have to keep a reservoir of funds to cover increased health needs in your future, you can enjoy spending it now on realizing your full retirement dreams.
Making Money Last in Retirement Means Enjoying Yourself
We all know why it’s so crucial to ensure your retirement budget is set up in such a way that it will last as long as possible.
It’s no big mystery, you want to have the resources to enjoy your retirement to the fullest without having to worry if you can afford the things we all need: having a place to stay that’s safe and comfortable in between your daily adventures. This makes managing your retirement budget carefully an important task.
Minimizing your living costs helps you manage that budget, as you’ll have more money left over for enjoying yourself at the end of the day. Whatever you like to do, whether it’s spending time with your grandkids, going out on the town, or traveling the world, you’ll be able to afford it more easily when you keep a close eye on your budget.
It’s nobody’s choice but yours when it comes to deciding how you want to enjoy your retirement years. Keep all these great money-saving tips in mind and you too can rest assured you’ll be able to enjoy your retirement to the fullest!
Acts Retirement-Life Communities maintains 26 continuing care retirement communities across nine states. Please feel free to explore any of them to see how they will fit into and enhance your lifestyle.
