Financial Advisor Michael Ladin Offers Advice on Making a Retirement Nest Egg Last
When people reach retirement age, their financial priorities turn to ensuring that the nest egg they have spent a lifetime building lasts throughout their lifetime. Individuals who have been saving and contributing to a 401(k) or IRA for the past 30 – 40 years are now tasked with etching out a plan that establishes an income stream to hold them over and handle unexpected expenses.
While the rule of thumb for retirees to avoid stock market volatility, it doesn't mean that retirees shouldn't invest altogether. A well-planned and maintained portfolio that includes conservative market investments is important for income growth during these years.
However, when market volatility or an unexpected expense drains a portion of one's retirement funds, Ladin offers six tips for compensating the loss and stretching a nest egg for 30 years or more.
1. Delay claiming Social Security Benefits. An individual's
2. Begin retirement account withdrawals early. While most people consider deferring retirement account withdrawals to age 70 1/2, it could be beneficial to contemplate spreading the tax consequences out over many years by beginning withdrawals sooner. While traditional retirement accounts such as an IRA don't require withdrawals to begin until after age 70 1/2, taking smaller distributions starting in their 60s can disperse a retiree's tax bill over more years and can help them stay in a lower tax bracket, reducing their lifetime tax bill.
3. Review withdrawal rates. Traditionally, the rule of thumb in retirement was to withdraw 4 percent annually to cover living expenses. However, market volatility makes withdrawal rates a bit trickier today. For example, if a couple retires at age 67 with
Purchasing a fixed indexed annuity is one measure pre-retirees can take to help guarantee their income stream for life, as an annuity can offer a consistent distribution rate since it is not subject to market volatility.
4. Postpone cost-of-living raises. Many pre-retirees who depend on their portfolios for retirement income give themselves raises every year to keep up with rising expenses. But whenever possible, Ladin suggests they try to live without the increase for a few years, especially if their portfolio loses a significant amount of money. By avoiding cost-of-living adjustments on withdrawals for a 5-year period, a conservative portfolio is better able to last throughout retirement.
5. Revisit the budget. Pre-retirees with no options for increasing their income may need to consider cutting expenses in order to make their nest egg last longer. Ladin suggests cost-cutting measures such as cutting monthly bills as much as possible by downsizing to a smaller house, for instance, or moving to an area of the country with a lower cost of living if it's possible. He also suggests cutting back from two cars to one, and taking advantage of Groupons, sites like Living Social, and other cost savings opportunities whenever possible.
6. Work part-time. While few retirees relish the idea of working during their golden years, it can help delay tapping a nest egg, or help keep retirement fund withdrawals to a minimum.
People who sign up for
"Plus, your benefits aren't withheld forever," Ladin says. "If your
To learn more about making your nest egg last longer, visit the
About
The host of Retirement Radio's "Strategies for Financial Success" on NewsTalk 610 WIOD, Saturdays at
Since beginning his career in the financial services and insurance business more than 20 years ago, Ladin has built a reputation as a respected public speaker and consultant.
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