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Retirement is a major milestone, and most of us look forward to the freedom that this next phase in life can bring. While approaching retirement is exciting, it can also be scary to think about no longer working to earn an income after so many years in the workforce. As the average life expectancy continues to increase, retirees are needing to save more money to ensure a comfortable retirement. Read on for a few tips on how to make money last through retirement:
Evaluate Your Spending
One way to help make your money last is by evaluating what you are spending money on and determining where you can cut costs. Finding ways to save may be easier than you think. For example, if you find yourself rarely watching television, consider cutting cable as a way to save money each month. On average, cutting cable can save households an estimated $1,200 a year.
Many retirees also consider other ways to lower fixed expenses, and one major fixed expense is likely your mortgage. It is common for people around the age of retirement to move into a smaller home. Downsizing your home can save you money each month on your mortgage, home maintenance, and utility costs, though it is important to consider costs that come with moving when deciding if downsizing is right for you.
Find ways to continue earning
There are many ways to continue to make money outside of a full-time job. One option is to find a part-time job, such as at a grocery store or coffee shop, to earn some extra cash. If working a traditional part-time job after retirement isn’t for you, you can also make money in a variety of different ways, such as by selling crafts or providing pet care. Either way, it could be a fun opportunity to meet new people and try new things. If you do choose to find part-time work after retirement, keep in mind that you may potentially lose some Social Security benefits at first, depending on your age and income earned.
Keep an emergency fund
No matter what stage in life you are in, it is important to maintain a savings account for emergencies or unforeseen expenses. Life can be unpredictable and expenses may be needed when you least expect it. Having an emergency fund in retirement is especially useful if you don’t want to tap into your nest egg to cover unexpected costs. Be mindful of expenses that may sneak up on you, such as health care or home repairs, and build up a savings account that can help make unexpected expenses easier to manage.
Create a budget
In retirement, budgeting is important when considering a withdrawal rate for your retirement funds. One potential guideline that you can follow is the 4% withdrawal rule, which allows you to withdraw 4% of your nest egg during your first year of retirement. Following this guideline, you can adjust your withdrawal rate each year to account for inflation. While the 4% withdrawal rule is a popular guideline, you should determine what withdrawal makes the most sense with your budget.
Budgeting for retirement also depends on what you want your retirement to look like. Do you plan to travel multiple times per year or will you stay home and enjoy the simple things?
Once you’ve found a retirement lifestyle and budget that works for you, be sure to stick to it to make your savings last.
Retirement is an exciting stage of life that brings along the opportunity to experience new things and take a step back from the hustle and bustle of a work day. Being mindful of your spending during this time can allow you to enjoy the freedom that comes with retiring.
This blog article is intended to provide you with a general understanding of the subject matter. It is not intended to provide legal, accounting, or other professional advice and should not be relied on as such. Information may have changed since the publication date.