Managing your money in retirement

People are living longer. The Retirement Confidence Survey, which is conducted by the Employee Benefit Research Institute (EBRI), found that 18% of workers expect their retirement to last ten years or less. Another 15% believe it will last 11 to 19 years. In reality, half of the men living to age 65 can expect to be alive at age 82. Half of the women reaching age 65 will live to age 86. An increasing number of Americans are living to be 100. Everytime you pick up a newspaper or magezine you are hearing similar information. Americans are living longer. The mantra of American Annuity Advocates is; íLiving longer living better with annuities! Annuities act as income insurance, providing a monthly income you cannot outlive.

Plan, plan and plan. First, you need to figure out how much money you will need in retirement. Retirees are expected to typically need at least 70 to 80 percent of their pre-retirement income. Once you know what your additional monthly income needs are, an income plan can be designed to deliver the exact dollar amount to you each and every month.

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Will your money last as long as you do? You may already be in retirement, or retirement may be very near. It may be very difficult to make your savings last through retirement for various reasons. Perhaps you did not save enough. Perhaps your investments wonít keep up with inflation. Perhaps you or your spouse, simply spend too much. Perhaps your investment decisions did not pan out as well as you had hoped. Not everyone is fortunate enough to have worked for a company that provided a pension that pays them regular monthly income. The point is, we all need a plan! Take the time to take control of your savings, to make certain your savings last as long as you do. Fixed and fixed-indexed annuities may provide the safety, the guarantees, and the income that will provide the financial security retirees are seeking.

Most experts believe you can take out approximately 4% from your savings per year in retirement, and not outlive your money. As you increase your withdrawals above 4%, your chances of running out of money in retirement increase. If you are in retirement, and your nest egg is invested in market sensitive investments, and you experience a decline in the market, the results could be devastating to your retirement. Retirees need to make sure that their actual savings/ investment strategy is as conservative as they are. Are you taking risks you cannot afford to take? Can you really afford to lose a portion of your savings? If you cannot afford to lose money in the market, stop and take control by repositioning your nest egg so your savings/ investment strategy is as conservative as you are.

You should also think about which savings or investments accounts you are going to withdraw money from by priority. The order by which you begin to withdraw money from your retirement savings is important. To get the most of tax-deferred savings you are encouraged to withdraw money from your taxable accounts first and let your tax-deferred accounts grow as long as possible. Those of you with Roth IRAs should consider taking these assets last, to make the most of tax-free compounding. Keep in mind that individual circumstances will change the order of withdrawals.

Consider your health status. Even though you feel great today, good health comes with no guarantees. Future medical expenses can change the amount of money youíll need in retirement, and health problems can change your retirement dreams dramatically. Consider that the health of your spouse can also change your lifestyle in retirement. The possibility of nursing home or home health-care needs in retirement must also be considered. Coverage for nursing home and/or home health care is available from several sources, either traditional long term care insurance, universal life with long term care and home health care riders, or an annuity with a long term care benefit rider. One of these options should be considered.

You have contributed to the Social Security trust funds all of your working years. Your Social Security benefits provide a strong base for retirement income. It is the largest source of income for older Americans. It is estimated that Social Security benefits will replace only about 40% of your paycheck. Having other sources of retirement income will increase your standard of living, providing a more joyous retirement.

We all have a decision to make regarding when to begin getting our Social Security benefits. We can get a reduced benefit beginning at age 62. But if we wait until our full retirement age (sometime between age 65 and 67), we will receive our full benefit. If we wait even longer, we will reap the benefit of an even larger social security benefit check. Since we do not have a crystal ball, we donít really know which age we should begin drawing upon our social security benefit. Consider premature death. You may not live long enough to reach the breakeven point, the point at which our early withdrawal benefit crosses over the regular withdrawal age benefit. With that said, if you can afford to wait, and you live a long life, your total benefits recieved may be higher.

Most people consider the idea of working in retirement. More and more seniors are deciding to continue working in retirement, with a second, third, or fourth career. According to research by AARP, about 70% of mid-life and older workers expect to continue working in retirement. People will work in retirement for various reasons, for the money, for the companionship, to give back something to the world, to stay active,or simply to stay sharp. The options available to a mature workforce are different today than in the past. Many employers genuinely appreciate the experience and knowledge offered by seniors employees. These employers encourage seniors to apply by offering flexible hours or allowing folks to work from home.

How and where you live can greatly impact your financial security in retirement. Location, Location, Location. Where do want to live in retirement? Do you want to remain in your present home or do you plan on moving into a retirement community with less living space? Perhaps you want to live out your days in smaller homes, one in Minnesota, and one in North Carolina, splitting your winter and summer months? If you live on the east coast, and youríre lucky enough to have a summer home at the beach, you may want to consider selling your primary residence and retire at the shore.

It may be a great time for you to cash-in on your greatest investment, your home. Move to that Florida condo youíve been dreaming about, and receive a windfall from the sale of your current home, up to $500,000 can be earned and kept, without paying any federal income tax on the profit you made from the sale.

As you contemplate a change in scenery, consider the new variables you will encounter.

  • Is the cost of living going to increase or decrease?
  • Are you moving to a town where taxes are greater than where you moved from?
  • Many people move and find the climate was nice when they went there for a visit, but after they have arrived and settled in, itís much warmer, or more brisk than they remembered.
  • Do you have family or friends that will live close to your new home? It would be nice to have family and friends nearby. Consider what it would be like without such support.
  • If you wanted to work part-time, is there an opportunity for employment?

Spending habits will be different. You are likely to spend as much or more in retirement than you have in the past. You have more time on your hands, hence, you are likely to spend more time and money while involved with new activities. You may just find yourself spending more time perusing the shops in small towns when you travel the country. You may spend more time attending retirement parties which requires the purchase of a gift. You donít have to spend more in retirement, and you certainly didnít expect to, but it happens!

What can you do to keep more of your money in retirement? Be frugal, not cheap, become practical with your money and donít splurge. Donít whip out the credit card on a whim, just because you think it would be nice to have a particular item. How about cutting out some of the frills, the luxuries that you just canít afford. Keep only the credit cards you really want to keep and get rid of the rest. Before you had a lot of money, you put thought into your purchases. You shopped around for a better price.

Perhaps itís time to make out a budget. You may find you have more discretionary income than you thought, but it would not have come to your attention if you did not sit down to write out a budget. Now you can get organized and plan a new vacation, even put some mad money aside.

Consolidate debt with a home equity loan. You may want to consider a home equity loan, only to pay off credit cards, a car loan, or other high interest consumer debt. Remember that the interest you pay on home equity loans is tax deductible, and you may also get a lower interest rate.

Consider a Reverse Mortgage
Your retirement years should be spent without financial worry. So if youíre 62 or older, now may be the time to consider a reverse mortgage to unlock the wealth youíve built up under your own roof. And you can do it while still living in your home and remaining the owner!
Thatís right! Stay in your house and receive income for life with a reverse mortgage!

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