I’m a Financial Planning Expert: Retirees Should Do These 8 Things To Protect Their Retirement Savings

If you’re among the 40% percent of Americans who know exactly how much they have in retirement savings, it’s probably at the top of your mind how to ensure that these funds are still available when you’re ready to take them. Some people may simply try to stick them into savings accounts, while others may opt for investments to grow that money.

Here, experts explain how you can best protect your retirement savings.

Position Investments for Growth

The ironic thing about saving for retirement is that you do benefit from taking a little bit of risk, too. According to Dominic James Murray, CEO, founder and financial advisor at Cameron James Financial Planning, “A balanced investment strategy that combines growth potential and risk can extend the life of your savings while protecting against inflation. Diversification across different asset classes, such as stocks, bonds, and real estate, can provide potential growth without taking on excessive risk.”

Are You Retirement Ready?

Don’t Withdraw Too Much

Of course, you also want to make sure you don’t whittle away that savings too quickly once you hit retirement to ensure your savings last for the 20 to 30-year span of retirement. Murray recommends a disciplined approach to withdrawals.

“An initial 4% to 5% withdrawal from your savings during the first year of retirement can be a good starting point. Adjust this rate in line with inflation for subsequent years,” he said.

Consider Annuities

For those with a conservative risk profile, Murray recommends putting some money into annuities, which can be a reliable source of retirement income. “Annuities can provide protection against investment losses and ensure a steady income stream in retirement.”

Pay Off High-Interest Debts

If you’re getting close to retirement and you still have high-interest debts, such as credit cards or personal loans, it’s time to get those paid off. Ismaiel Mansoor, chief financial officer at Money Advisor, said, “The high-interest rates on these debts over time may deplete retirement funds. Focusing on paying off these obligations can help seniors have more money to put toward savings and investments, which will lessen financial strain and increase their long-term financial security.” 

Are You Retirement Ready?

Invest in Long-Term Care Insurance

What does healthcare insurance have to do with your retirement savings? Well, consider that the average retired couple aged 65 needed approximately $315,000 saved just to cover healthcare expenses in retirement, as of 2022. That’s a big chunk of change.

“Long-term care insurance could prove instrumental in managing these costs and preserving your retirement income,” Murray explained.

Keep an Emergency Fund

To protect their savings in retirement, retirees should have a solid emergency fund in place, typically of three to six months’ worth of income, according to financial advisor Michael Ryan. “This fund can act as a safety net for unexpected expenses, allowing retirees to avoid dipping into their retirement savings prematurely.”

Protect Against Inflation 

Steep prices due to inflation can eat away at savings. Retirees can be significantly affected by inflation, as it can erode the purchasing power of their savings and reduce their standard of living, according to Baruch Silvermann, investor and CEO of The Smart Investor.

“For example, if a retiree has a savings account with $100,000 in it and 4% APY, and inflation is running at 6%, then the real value of that savings account will be reduced to about $98,000 in just one year. Over a longer period of time, the impact of inflation on savings can be even more significant, which can make it harder for retirees to maintain their desired lifestyle throughout retirement,” said Silvermann.

Are You Retirement Ready?

To address the impact of inflation on their income and savings, retirees may want to consider diversifying their investments by adding assets that have historically performed well during inflationary periods, Silverman explained.

Invest in CDs or Treasury Bonds

To safeguard their savings, retirees should consider secure investment options such as Certificates of Deposit (CDs), Treasury bonds, and highly rated corporate bonds, Silvermann added. “These instruments can offer yields of around 5-7%, which should be adequate to counter the current levels of inflation.”

Overall, speaking with a financial professional and stacking a series of investment approaches is the most likely way to protect your retirement savings.

More From GOBankingRates


See Today's Best
Banking Offers