You want your money to last during your retirement and beyond, but there’s a good chance you are concerned about outliving your money. While I’m not overly concerned about having a lot of money left over for my son, I do want to make sure I have enough money to last my lifetime — however long that ends up being.
With longevity increasing, there is a good chance you could spend a solid 40 years (or more) in a “retirement” situation.
In order to make sure your money lasts longer than you do, here are a few strategies to consider.
Don’t Quit Working During Retirement
I’m really not much interested in living a life of complete idleness. As a result, there is a good chance that even during “retirement,” I’ll keep doing something I enjoy. Since I like writing, I’ll probably keep doing it and keep getting paid for it.
If you can get a part-time job you enjoy or do a little consulting or find some other paying activity to do after you retire, you will have some small money coming in, and you won’t have to rely so heavily on your nest egg. This can provide one way to extend your money.
Generate More Revenue Through Growth Investments
While you don’t want to keep your retirement portfolio entirely in growth investments, you do want to retain some of them. You need to keep building wealth; your money needs to earn money while you are in retirement. A few income investments can help generate revenue for you so you don’t have to draw on your original capital, but you also want to include growth investments.
One strategy that has become popular in recent years is the bucket strategy. With this strategy, you divide your portfolio into buckets. One bucket is for money you need now. Since liquidity is important, these assets are normally in cash and cash-like assets.
The next bucket is for money you won’t need for five to seven years. You can put income investments and blue chip–type investments in this bucket. And finally, you put growth-type investments in the last bucket, which is money you don’t need for another 10 years or more.
As you need money, you “pour” out of the first bucket. This arrangement helps you continue to grow your nest egg with your second and third buckets so your money is likely to outlast you.
Find Investments With a Guaranteed Rate of Return
If you are concerned about making sure you have at least a minimal income until you die, the right kind of annuity can help. You can invest in a variable annuity with a living benefit that allows you a guaranteed return each year, with the chance of more if the market does well. Plus, the living benefit means some of your annuity passes on to your heirs after you die.
Take a portion of your portfolio and use it to purchase an annuity that will supply you with the basics of life indefinitely. The rest of your money can be invested in growth and income assets that can provide you with extra income.
While you need to be careful of annuities, since they can be complex, expensive and sometimes not worth it, for some people they provide peace of mind — and a surety of income until death.