Nowadays, we’re all living longer, and those life expectancy numbers are only going to rise. With people living up to three or four decades in retirement, it's crucial you have enough money to enjoy all your retirement days. What do you do if you run out of money?
There are many ways people can run out of money, but there are some easy ways to avoid that.
Write Out Your Retirement Plan (and Check It Often)
The No. 1 question we get as financial experts is: Will I have enough money for retirement? No one wants to outlive their money, so our first piece of advice is to make a plan. Having a comprehensive plan before you head into retirement can save you headaches down the road.
To create a retirement plan, you need to answer some basic questions:
- What are your income needs?
- Do you have any additional income sources?
- Will you have a shortcoming in your income needs?
- If so, what resources will you have to address those shortcomings?
A financial adviser can help you answer those questions and start putting a plan in place. Having that retirement professional helps you identify your needs now and in the future.
Invest Your Money in the Right Place
An important part of your retirement plan is deciding where to invest your money. This is one of the reasons why when we are putting a retirement plan together, one of the first things we look at is our clients’ risk tolerance. This is one of the most important things to know before investing. If you are taking more risk than you are comfortable with and the market declines, you may panic and make a costly decision. Remember that an investment that works for one person may not be a good investment for you. Talk to a financial adviser to learn your options and what approach best suits your needs.
Don’t Fall Victim to Fraud
Phishing emails and scamming phone calls are becoming more and more common. This is especially true for those already in retirement. People are trying to take advantage of our older generations. On average, senior citizens lose $1 billion a year in scams. All retirees and even those getting close to retirement need to be informed and educated on avoiding scams.
First and foremost, research any purchase, donation or investment before you jump into it. If an opportunity sounds too good to be true, it probably is. The consequences of falling victim to fraud could be far-reaching. You may think it will never happen to you, but it could. It happens more often than you think. Scammers are getting smarter and more sophisticated, especially with all of our information online.
If you are scammed or fall victim to fraud, you may not know it until it is too late. Always be proactive as opposed to reactive. Trust your gut, be concerned, and ask lots of questions. Don’t make a quick decision on your own. Always ask your financial planner if this financial decision is a smart one.
Have a Budget and Stick to It
When most people get to retirement age, they want to maintain the same standard of living they have gotten used to. Having a budget can help get you there. While many of us may think of this as a simple step, it is surprising how many people do not have a budget.
Begin your budget planning by tracking all of your expenses. This will help you see where every single dollar is going. Start tracking your income, where it is coming from and exactly how much is coming in on a monthly basis. After tracking your income, make sure that your expenses are less than your monthly income. If they aren’t, find a way to cut back on some expenses. This budget will help you determine how much money you need on a monthly and annual basis to support the lifestyle you want and to help you continue that into retirement.
A budget is a helpful tool on your journey of financial planning. But also make sure you have an emergency fund set aside. We saw how crucial this was for many people at the height of the pandemic. Try to have at least three to six months of expenses in that fund should you lose your job, experience car trouble or have an emergency house repair.
No matter how close or far you are from retirement, you want to make sure you will have enough money. Don’t be afraid to ask your financial planner what you need to do. You want to continue living the lifestyle you have become accustomed to well into your golden years, and achieving that starts with a plan.
Tony Drake is a CERTIFIED FINANCIAL PLANNER™and the founder and CEO of Drake & Associates in Waukesha, Wis. Tony is an Investment Adviser Representative and has helped clients prepare for retirement for more than a decade. He hosts The Retirement Ready Radio Show on WTMJ Radio each week and is featured regularly on TV stations in Milwaukee. Tony is passionate about building strong relationships with his clients so he can help them build a strong plan for their retirement.