You’ve Outlived Your Retirement Savings — Now What?
Written by
Laura Beck
Edited by
Renee Ross
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Retirement is supposed to be a time of relaxation and enjoyment after a lifetime of hard work. Unfortunately, for many individuals, the reality of retirement may not always align with their expectations. A recent GOBankingRates survey revealed that 33% of people are afraid of outliving their retirement savings.
If you find yourself in this situation, don’t despair — there are steps you can take to navigate this challenging phase and secure your financial future.
Assess Your Financial Situation
The first step to handling depleted retirement savings is to take a comprehensive inventory of your current financial status. Evaluate your current income, expenses and remaining assets to understand the extent of the shortfall. This analysis will help develop a realistic plan and identify areas where additional support may be required.
Daniel Morris, founder of My Caring Plan, said, “Check your essential vs. non-essential expenses. Identify areas where you could trim the excess and prioritize needs over wants. It is a complicated conversation to have but a necessary one. Reducing expenses and making the most of what you have left can prolong the longevity of your savings.”
Revamp Your Budget
It’s time to prioritize needs over wants and adjust your budget to match your new financial reality. Cut unnecessary expenses and embrace a frugal lifestyle. Revising your budget will provide clarity on how to make your money last longer.
“The budget you had during your working years may not suit your retirement,” said Dominic James Murray, CEO and independent financial advisor at Cameron James. “I’ve worked with clients who felt hopeless, but once we revised their budget, focusing on needs over wants, it’s like they could breathe again. It’s amazing what smart financial choices can do.”
“You may need to make some drastic changes to your lifestyle in order to live within your new budget,” said Linda Chavez, founder and CEO of Seniors Life Insurance Finder. “Consider moving somewhere more cost-friendly, downsizing your home, eliminating costly hobbies, and reducing other nonessential expenses.”
Downsize
Downsizing is often a pragmatic first step to regain control over your finances. Consider selling your home and relocating to an area with a lower cost of living or explore reverse mortgage options if you have substantial home equity. Additionally, explore part-time work or consulting opportunities to supplement your income and keep you engaged.
“I’ve seen too many clients struggling to maintain a lifestyle they can no longer afford,” Murray said. “It’s painful, but downsizing — moving to a smaller home, selling a vehicle, cutting back on expenses — is often the most pragmatic first step to regaining control.”
Consider Leveraging Your Home Equity
If you are the owner of a home with equity, Samantha Hawrylack, a retirement and personal finance expert and co-founder of How to FIRE, said that you may have exhausted your investable assets, but you have not exhausted your capital. This means that you may still leverage your properties and capital assets to generate funds to last you the rest of your life. However, she warns, this will potentially compromise your generational wealth.
“Your home, for many, is your biggest asset,” Murray said. “It’s not easy to consider a reverse mortgage or selling the family home, but doing so can turn a source of emotional wealth into a crucial financial resource.”
Consider Re-entering the Workforce
“If you’re still physically and mentally able, consider re-entering the workforce either full-time or part-time,” Chavez said. “You might also consider starting your own business and leveraging your skills and experience into a successful venture.”
Young Pham, a financial advisor and project manager at Bizreport, recommends thinking about how you can use your skills or hobbies to participate in the gig economy.
“Platforms such as TaskRabbit, Fiverr and Upwork allow you to earn extra money by completing small tasks, offering services or doing freelance work. This can supplement your income and help you bridge the gap during difficult times.”
Tap Into Social Support Networks
Don’t hesitate to lean on family and close friends for emotional and financial support. Sometimes, a strong support system can provide temporary relief during difficult financial times.
“Simply ask for financial help from your relatives,” Hawrylack said. “If you have children or grandchildren that can support your retirement years once you’ve run out of funds, that’d be great! Especially if you set them up for a financial legacy and built generational wealth for them, seeking care and financial support from your family would be the best way to survive your remaining years.”
Seek Professional Financial Advice
“If all this feels like too much to handle, reach out to a financial counselor specializing in retirement issues. Even I, as a seasoned financial advisor, know the value of getting an outside perspective. You don’t have to navigate this path alone,” Murray said.
Reaching out to a financial advisor who specializes in retirement issues is crucial if you feel out of your depth. An expert can provide personalized guidance and help you develop a financial recovery strategy tailored to your unique circumstances.
Bottom Line
Facing depleted retirement savings can be a daunting experience, but it doesn’t mean the end of the road. By following these steps and seeking expert advice, you can create a plan to weather the storm and secure your financial future. Remember, the goal is not just to survive but to enjoy the retirement phase, even if it’s not as initially planned. With the right approach and support, you can still live a fulfilling retirement, regardless of financial challenges.
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