Facing Down the Fear of Running out of Money in Retirement

Retirement is a major life change that may generate the fear of running out of money. Not having a large enough nest egg and outliving savings and investments are the most frequently reported retirement worries across all ages. Here are some risks to how you could run out of money in retirement and ways to avoid them.

You Abandon Stocks:  Yes, stocks are risky, but without stocks, you might not get the growth necessary for long-term income. You need your money to continue to grow through those 20 to 30 years of retirement to outpace inflation and help maintain your lifestyle. Emotional panic-buying and panic selling can drastically reduce returns.

A better approach is to stay invested for the long-term and remain committed to a well-managed diversified portfolio that can withstand market volatility.

You Spend Too Much Money:  This one seems obvious, but all of us are guilty of this, whether or not we’re retired.  Many retirees say their overall spending is higher than they expected perhaps due to unforeseen expenses.

Budgeting is more important than ever, both for your current or future retirement expenses. Part of your preretirement planning should include calculating your fixed income needs.

You Don’t Factor in Insurance:  Health coverage is essential to helping prevent a devastating illness from wiping out your retirement savings. To make the most cost-efficient decisions, you should have a full understanding of Medicare costs and health benefit gaps for your specific situation and timeline.

It’s not just health insurance. Life insurance can provide security at any age, but whether you need it in retirement depends on your situation. Some of the concerns and coverage may no longer be relevant for your age and family. An advisor can assess the coverage benefits vs. cost of your current policies and perhaps reallocate monies towards growing income.

You Plan on Just One Source of Income:  In retirement, having multiple income streams is almost always better than just one. Many retirees consider Social Security to be their primary source of income, but worry that it will be reduced or cease to exist in the future.

However, if combined with what you saved for retirement in 401(k)s, brokerage accounts, IRAs, etc., you will have a more stable and diversified income stream to rely on in your retirement years.

You Forget About Taxes:  Your tax exposure changes throughout retirement, and it’s important to know how and when to use taxable, tax-deferred, and tax-free assets to manage your long-term income. You should have a withdrawal strategy that spreads across your various income streams and can extend the lifespan of your savings and reduce the taxes you pay throughout retirement.

You Don’t Account for Where You Live:  Where you live affects your cost of living, what you pay in taxes, and even your accessibility to health services. You may consider downsizing or moving to a state that is more tax-friendly for retirees. That’s why regular reviews of your financial changes in retirement are important to make the appropriate adjustments to your spendable income.

You Don’t Prepare:  At Biondo Investment Advisors, we don’t want running out of money to be a worry in your retirement years. Your Wealth Advisor understands these risks and can discuss a strategy that works best for you. We are committed to being a trusted resource for you and your loved ones on how to handle your money as you prepare for and manage your retirement.

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