As you get older, it’s only natural that your mind starts to turn to your retirement. After all, you’ve worked hard for your entire life, so you should have the best possible opportunity to put your feet up. But, how do you make sure that you have enough money? In this post, we take a look.
Expect to Live Longer
It’s bad news for millennials: you’ll have to work longer than other generations. Thanks to medical advances, millennials are now likely to live well into their 80s or 90s. Although this is undoubtedly great news, it also means that you’ll need more of a retirement fund. For example, if you were to retire at 65 and live until you were 90, you’d need to be able to support yourself for 25 years.
You don’t want to outlive your savings and rely only on your social security as it may not cover all of your needs.
So, consider what your income needs are annually and then calculate just how far your social security will stretch. The deficit between these is how much you’ll have to contribute yourself to maintain your current standard of living in retirement. In order to take the stress of this away, some people buy an annuity.
Prepare for Inflation
Even a low inflation rate can reduce your purchasing power. By increasing the cost of goods and services, inflation will mean that you’ll effectively have less money for your retirement.
Plus, if you’re investing as part of your pension, ensure that you choose ones that have the potential to keep pace with inflation. These are usually growth-oriented investments, such as stocks, stock mutual funds or real estate securities.
Keep Hold of Your Savings
If you spend your savings rapidly, you’ll soon run out of money. As such, you should always opt for a far more conservative withdrawal rate. If you’re looking to retire for 20-30 years, then you should withdraw no more than 5% of your savings in the first year of your retirement. You can then adjust for inflation from here.
Plan for Every Eventuality
Sadly, the world around us is changing. As such, you have to plan for every eventuality, just in case. For example, nowadays, almost half of marriages end in divorce. If you’re not careful, if you split with your spouse on bad terms, they could be entitled to some of your savings. As such, you should ensure that you get expert legal representation from experts such as Withers. It’s the worst case scenario, but you have to be prepared for every eventuality and to fight for your savings.
Follow this advice and you should have plenty of money for your retirement.
My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.