Living a long and healthy life means that if you retire at age 66 or 67, your retirement savings may need to last 25 to 30 years or more. So, as you save and plan for retirement, you want to make sure you have the income you need for the years ahead.
Are you asking yourself, “Will I outlive my retirement savings?” If so, here are six steps that can help your money last for the rest of your life.
Aim to Save 15% of Your Income for Retirement
Experts recommend saving 15% of your income to make up the difference between your Social Security payments and your expenses during retirement. Of course, that’s a general estimate. You may want to save more if you expect to spend a lot during retirement, while a pension or other income sources may mean you can save less.
If you can’t afford to save 15%, start with what you can afford and increase your contribution when you get a raise or when your expenses drop. For example, parents may be able to contribute more when their children start school and childcare expenses decrease.
Think About When You’ll Start Collecting Social Security
Depending on your age, you can start collecting Social Security as early as age 62, get full benefits at age 65 to 67 or collect a higher amount that gradually increases until you reach age 70. Waiting gives you a higher benefit — about 8% more per year – and your yearly cost of living adjustments will be based on this higher benefit level.
Of course, when you wait, you give up the benefits you would have collected earlier. The breakeven point is unique to you, which is why it’s helpful to work with a professional who can help you look at the larger picture and make well-informed decisions.
Invest Your Money Wisely
You can invest your retirement savings in accounts like a 401(k), a traditional IRA, a Roth 401(k) or a Roth IRA. These types of accounts can save you money on taxes. A financial planner can work with you to figure out which options fit your situation.
See If You Can Enroll in a Health Savings Account (HSA)
Health care expenses can eat up a lot of your income and savings in retirement. One way to cover some of these expenses is with an HSA. You can put money in an HSA if you’re enrolled in a high-deductible health insurance plan.
These plans may also benefit you during tax time, because you’re not taxed on contributions, earnings or withdrawals you use for medical expenses. Any money you don’t use stays in your account, so you can use it later.
Look Into Long-Term Care Insurance
The cost of care from home health aides or in assisted living facilities can be very expensive, and these costs can hit in your later years when you may have already spent a lot of your retirement savings. You may want to consider long-term care insurance to help cover these costs.
Make Working Work for You
The more income you have coming in, the less you need to draw from your savings. In retirement, you might want to work part-time in your field, take on work as a consultant, start working in a new field or work seasonally. And working isn’t just about the money. It can boost your social connections and help you feel like you’re doing something that matters.
Connect With Someone Who Can Help
Planning for retirement is a complex process. Reach out to a Farm Bureau agent who can help you understand how to protect your retirement savings and help you create a plan to get where you want to be.