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.