Date: June 3, 2022

We’re Afraid of Running Out of Money During Retirement

Many Americans might not go completely broke in retirement, but the fear of running out is real, especially when financial markets fall. According to a February 2021 research report by the National Institute on Retirement Security, 56 percent of respondents said they are concerned about achieving a financially secure retirement

The good news is that the right financial professional can help ease your fears by showing you how to make your money last longer. In this article, I share some tips for stretching your nest egg and recommend how to maximize its potential.


What Might Prevent You From Retiring With Confidence in Connecticut?

Three challenges threaten your retirement lifestyle: Inflation, negative cash flow, and market volatility. Inflation has been in the news after slumbering for years. It eats away your purchasing power, especially your cash, forcing you to spend more just to maintain your current lifestyle. Inflation hits those on fixed incomes hardest.

It’s too easy to spend more than you collect each month, resulting in a negative cash flow. Your income sources — Social Security, retirement accounts, pensions, annuities — might not cover your expenses. Saving too little before retirement is the chief culprit, perhaps coupled with an overextended lifestyle.

As mentioned, inflation is a real problem that requires you to invest at least some of your retirement savings into stocks and other assets that can outpace inflation. Markets fluctuate up and down, and it’s easy to panic during downturns. But abandoning stocks locks in your losses and can make you more vulnerable to inflation.


7 Practical Ways To Avoid Running Out of Money in Retirement

Here are seven practical ways to ensure you don’t outlive your money.

    1. Keep Earning Money: Many seniors find it fulfilling to work part-time using the skills they’ve built over a lifetime. The extra earnings can make a real difference in your finances.
    2. Monitor Your Assets: Keep track of your assets to ensure you don’t become overweighted in some, underweighted in others. You should follow an asset allocation plan based on your needs, age, health, and risk tolerance. Heritage Capital can help you set up a personalized retirement plan.
    3. Invest For Income: The bulk of your investment strategies should generate income in the form of interest, dividends, and capital gains. Diversification helps reduce investment risk, and the best income-oriented mutual funds, ETFs, and REITs are diversified, professionally managed, and tax-efficient.
    4. Spend Less Money: A budget is a valuable tool for setting and monitoring the amounts you spend and reaching your financial goals. Sticking to a budget may reduce your spending without significantly affecting your lifestyle.
    5. Save More: You can’t go back in time to increase your pre-retirement savings, but you can save the money you don’t spend, thanks to your budget. You’ll deplete your money slower and rest a little easier.
  • Buy Long-Term Care Insurance: Many seniors will eventually require long-term care, a costly proposition that can quickly eat up your life’s savings. LTC insurance protects your wealth and offers you options to handle your future needs.
  • Delay Collecting Your Social Security: Although you can claim Social Security benefits at age 62, you’ll collect less money if you place your claim before reaching full retirement age (66 if you were born between 1943 and 1954). Rather than claim your benefits at age 66, consider waiting until you reach 70. In those intervening years, your benefit permanently increases by 8 percent annually plus the annual cost of living adjustments. 

6 Factors That May Make Your Money Last in Retirement

napkin with words Do I have enough to retire

It’s too easy to become pessimistic about your retirement income if you don’t consider some positive factors working in your favor. Here are six factors that can help you stretch your retirement savings further than you thought possible.

  • You May Need Less Than You Think: Many retirees find themselves spending less money each month than they anticipated. For one thing, preferences shift as we age, and spending we once took for granted may seem less worth it. A fixed income will focus your mind on reducing expenses, and you’ll benefit from eliminating work-related spending (e.g., commuting, office wardrobe, professional insurance, conferences, continuing education, unreimbursed expenses, etc.).
  • You Don’t Need to Save for Retirement Once You Are Retired: You no longer need to pour all that money into your 401k and IRA each year. That may result in tens of thousands of dollars freed up to support your post-retirement lifestyle. 
  • You Will Likely Adapt to Different Income Levels: You have many ways to adapt to a lower income level. Relocating and downsizing might save you hundreds or even thousands per month. You may have some expensive assets you no longer need, such as a boat or a vacation home. The ability, and indeed the desire, to simplify your life is one of retirement’s benefits. 
  • You Will Be in a Lower Income Tax Bracket. One reason for the popularity of traditional retirement accounts is that you deduct contributions at a higher tax bracket and withdraw taxable money at a lower one, thanks to your reduced income during retirement. Our graduated income tax system means you’ll have more money left over each year after Uncle Sam takes his cut.
  • You Will Find Many Ways to Make Money: The internet has caused at-home work opportunities to explode. You also now have time to turn a hobby into a money-making venture. Employers are screaming for workers of every type, affording you a wide variety of choices. 
  • You Can Always Tap Your Pre-Tax Retirement Accounts Early. You don’t have to wait for the required minimum distributions to kick in at 72 to access your retirement funds. That’s comforting to know if you have a sudden need for money.

Get a Second Opinion in New Haven

Hiring the right registered investment advisor to manage your retirement savings plan is an intelligent way to reduce your financial anxiety. In addition to the money you have with us, we’ll also help you with your retirement accounts. We’ll review your retirement plan and help you determine the best allocation. Then we’ll help oversee the plan and recommend changes when action is needed.

Retirement is an excellent time to evaluate whether your current advisor is providing you with the results you want. Switching financial advisors can make good sense, and I will be happy to lay out my vision for a comprehensive financial plan including your retirement plan at your earliest convenience.  Contact Heritage Capital for a free, no obligation 6 month trial.

Download our free guide “Understanding Social Security” 



Paul Schatz, President, Heritage Capital