Three methods to keep away from going broke in retirement
If you are thinking about retirement and wondering if your savings will support you for the rest of your life, you are not alone. A survey by Allianz Insurance Company found that two-thirds of respondents were more afraid of running out of money than of dying.
Yahoo Finance addressed your retirement concerns during our year-end monetary live stream. Our group of experts, which included Jean Chatzky, CEO of HerMoney.com, Avani Ramnani, CFP and asset manager at Francis Financial, and Alicia Jegede, CPA and tax planner, gave their advice on how to lead a responsible life in your retirement years.
1. Think about how you will allocate your funds year after year
Chatzky says we’re conditioned to save for retirement, but it’s just as important to consider how you should manage your withdrawals when you retire.
“Get the state of the country – especially when you are entering this stage of life where your income is likely to drop and you are not sure what will happen to your expenses, a lot of things are in the air.” She says.
Ramnani says you need to look at all of the elements of your retirement: how much you can take out without compromising your financial security, how long you will live, what your expenses will be, and what income, if any, you will get in.
“You could live in retirement for 20 to 30 years, so it’s not a one-time thing – there are so many nuances to consider,” she says.
2. Work with a financial advisor to implement your plan
Chatzky recommends having a plan for your retirement spending – otherwise, you’ll have to overpay early on.
“If you don’t have a plan for the future, you can overspend very quickly and find yourself falling into a deep hole when it comes to the rest of your retirement,” she says.
Ramnani recommends working with a financial advisor to help manage this transition period. “Help is available across the spectrum. You can only walk a few hours to someone, but you get good advice and walk away with a solid plan,” she says. You can also work with someone before and during your retirement to check in and make sure you are on the right track, she says.
3. Don’t tap your retirement account until you need to
If you do decide to use your retirement accounts before you reach retirement age, you will change your savings in the short term and taxes and fees will open up. You must be 59 ½ years old to withdraw funds from your IRAs and 401 (k) s without penalty. Before, and you could collect a 10% penalty tax with a few exceptions.