Stretch Your Retirement Savings With 8 Expert Tips

Mature smiling couple sitting and managing expenses at home.
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More than half of retirees report their current income is less than 50% of their pre-retirement income, according to the Goldman Sachs Asset Management Retirement Survey & Insights Report 2022.

Unfortunately, a significantly lower retirement income coupled with retirees’ reported concerns like inflation, meeting future healthcare needs and potential reductions in Social Security can lead to a surplus of stress and worry. 

On the bright side, there are steps you can take to stretch your savings in retirement. Here’s how, according to two financial experts. 

Try To Enter Retirement With No Debt

Debt can be a major drain on your retirement funds. 

Ron Tallou, retirement expert and investment advisor of RJP Estate Planning in Scottsdale, Arizona, said that ideally, you should have your mortgage paid off and any major home improvement projects should be squared away before you retire. 

“Credit cards, cars, children’s expenses, should mostly be zeroed out,” he said. “One way to stretch out retirement plans is by having low basic expenses like utilities and groceries. You should avoid going into retirement with a lot of liabilities.”

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Spend Less

Tallou said you should consider downgrading your lifestyle if you’re not able to work part-time after you retire to supplement your income.

“There is no shame in being a value shopper and cutting back dining out,” he said. “You can still do those things, but you must be mindful of the frequency.”

Run the Numbers

“Someone heading into retirement needs to consider the change in their cash flow,” said Tallou. “If you stop working, you need to calculate how much you expect to collect from fixed income sources.”

Tallou added that once you know how much to expect, you’ll have to decide if the amount will be enough to live off or if you will need to draw down on your savings and retirement plans. 

“If you do need supplemental income,” he continued, “meet with a financial advisor to run the numbers. Retirement software can show projections and what kind of rate of returns are needed for your money to last as long as you do. I feel like this is too often overlooked by pre-retirees. They fail to know their numbers and assume the accounts will continue to payout.”

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Consider Purchasing an Annuity

“The intended purpose of the annuity is to provide a guaranteed income stream through retirement regardless of how long you live,” said Tallou. “If the fear of running out of money is something that keeps you up at night, the annuity can ensure that you will never run out.”

Leverage Your Social Security Retirement Benefit

James Allen, founder of Billpin, CPA, CFP and CFEI, said to consider making your Social Security work harder for you.

“Ensure you have at least 35 years of covered earnings, as the Social Security system uses the average indexed monthly earnings from 35 years of your career to calculate the value of your benefits,” he said. “If both spouses are over age 62 and one claims retirement benefits, the other can claim the spousal retirement benefit, which may be higher-paying than their own benefits.”

Adjust Your Withdrawals

According to Allen, “The traditional recommendation is to withdraw around 4% per year from your retirement savings and investments. However, this rule doesn’t always stand up to scrutiny. Instead of using a set number, be ready to make frequent, gradual adjustments to your withdrawal rate to meet your needs for the year.”

Buy Against Inflation

Allen also said that inflation can be a major source of trouble for retirees because it drives down the real value of savings and reduces purchasing power.

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“Fortunately, there are certain types of financial products to help mitigate the effects of inflation, such as Treasury Inflation-Protected Securities, which are adjusted based on the Consumer Price Index and increase in value to offset inflation,” he said.

Reevaluate Asset Allocation

“Depending on your time horizon, age, risk preferences and need for liquidity, you might want to rethink your balance between stocks, bonds, mutual funds, annuities and other assets,” said Allen. “Market conditions can fluctuate, so you should be ready to reexamine your investment portfolio to reduce your exposure to a downswing or be willing to take some risks if you need to make up for a shortfall.

“Think of your retirement funds as a garden. You’ve planted the seeds (your savings), and now it’s time to tend to it. Prune where necessary (adjust withdrawals), add some fertilizer (maximize Social Security), protect against pests (buy against inflation), and don’t be afraid to replant if the conditions change (reevaluate asset allocation). With careful tending, your garden can provide for you throughout your retirement.”

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