How to Budget your Pension and Social Security to make it Last
One of the biggest concerns voiced by retirees is that their pension funds will not be enough to last them for the rest of their lives, especially when inflation is taken into consideration. However, the advice below will enable you to plan your retirement in such a way that your pension funds will be more than sufficient to last you well into your golden years.
Examine Withdrawal Rates Regularly
It is crucial to examine your withdrawal rates at least once a year, as this will help determine whether you are living off the interest of your retirement fund or whether you are spending your capital. If you find that you have been digging into your capital, it may be time to reevaluate your expenses. In some cases, it may be a good idea to schedule an appointment with a reputable financial advisor to determine whether it will be beneficial to move your fund elsewhere to help preserve it. A good rule of thumb is to ensure that your withdrawal rate does not exceed 4% of your account balance during any given year.
Consider Working Part-time
If you are physically able to continue working, it may be a good idea to scale down your hours instead of giving up work completely when reaching retirement age. This will help reduce the amount that you need to withdraw from your retirement fund, which will make it last a lot longer. In addition, you will be able to keep yourself occupied for at least part of your retirement, as many folk find themselves at a loose end if they suddenly stop working altogether when reaching 55, 60 or 65.
Check Your Budget Carefully
Not everyone is physically able to continue working after they reach retirement age. If you fall into this category for any reason, it may be a good idea to re-examine your monthly budget and reduce expenses wherever possible. Relatively easy ways to do this would be to consider downsizing to 1 vehicle, requesting senior discounts for products and services that your purchase regularly, moving into smaller or more affordable accommodation or even perusing your grocery budget to find possible options for reducing your expenditure.
Remain Debt Free
Your pension and/or Social Security payouts will not last very long if you have to finance debt repayments from them, especially when you take into account that interest that you pay on debt is always far higher than that received on your investments. Before retiring, it is essential to repay all outstanding debts in full, as this will allow you to spend your retirement fund on other essentials – and a few fun purchases, of course.
Preserving your retirement fund and/or Social Security payments by not spending frivolously will provide you with absolute peace of mind, because you will not have to spend some of the best years of your life worrying about being a financial burden to your loved ones at any time.