Making Retirement Savings Last

October 2nd, 2012  |  Published in Retirement  |  3 Comments

Most senior citizens have a morbid fear of retirement and the loss of income that comes with this life-changing situation. This is quite easy to understand because retirement comes with several unanswered questions. In most cases, the most significant question is; “how long will the retirement savings last?” Other questions which bother retired people are the inflation rate and the long term value of money. The point here is that a lump of money which has been set aside for retirement may not last the retired person as much as he or she will like it to last. This is why it makes a lot of sense for retired people to have a plan on drawing down retirement assets.

One of the best plans for spending retirement savings is the “4% rule”. This is a good plan because it usually works. More to the point, this rule takes care of inflation rates to a certain extent. A retired individual who has, say $1,000,000, can simply aim to live on just 4% of that sum per year. This works out at $40,000 per year and it is a reasonable sum for a senior citizen who has to really cut down on unnecessary expenses. The beauty of this plan is that the person in question can add just 3% per year to this figure annually. This will take care of inflation and ensure that the retiree is still on the right track.

Another great idea is to delay withdrawals from the pension fund for as long as is reasonably possible. This is a perfect option for people who can afford to wait because delaying withdrawal will substantially increase the retirement cash. For people who are married one great idea will be to maximize the years of tax deferral by living on the income of the younger spouse for a while.

As stated already, retirement can be a frightening prospect for some people. For all that, there is one way to make retirement pleasant experience. This can be done by careful planning of prudent spending of retirement savings.

  

Responses

  1. Jerry says:

    October 8th, 2012 at 8:53 am (#)

    With health insurance costs rising and inflation, it’s important that we save more than ever and making it last will lead to peace of mind.

  2. Thomas S. Moore says:

    October 14th, 2012 at 1:14 pm (#)

    The 4% rule is actually a great rule the problem is that most people wont have 1,000,000.00 saved. You have to have that money put away and frankly there aren’t a lot of things giving you 4% returns. Maybe 7 years ago you could have gotten long term cd’s with that rates but now youll be lucky to get 1-2%.

  3. certified financial advisor says:

    November 23rd, 2012 at 4:39 am (#)

    First of all I would like to say that your post is good, The thing anyone can do to last their retirement savings is I think they must keep their retirement savings away from their expenses and need to keep it as it is, as this savings are only for their retirement. Doing so will keep them on the right track and safe retirement life as well as they can use few more available option these days too.