When working Americans think about retirement, many are fearful that their savings will not last as long as they need it to. According to 2016 research from the Transamerica Center for Retirement Studies, running out of money is the top concern for those approaching their retirement. People are living longer lives and retirement savings has not caught up with our increased longevity yet. There are things that you can do to reduce the risk of outliving your money and ease your fears about your retirement years.
In order to make your savings last as long as you need them the following steps can help to put you in a good position:
- Maximize your opportunities for tax-deferred savings through workplace retirement plans.
- Investing your money responsibly in order to put the power of compound interest to work.
- Maximize your social security benefits by waiting to take disbursements for as long as you can.
- Consider phasing into retirement gradually so that you still have some income beyond retirement savings and Social Security.
Taking these steps will put you in a good place for retirement preparedness. Once you have established your retirement readiness plan, there are still obstacles that ca make achieving your retirement goals challenging. Often, when faced with these challenges, a financial adviser can help level the playing field and improve your chances of meeting your financial goals.
Retirement Income Sources
If you’re looking to enjoy a certain lifestyle during retirement, it’s likely you will need multiple sources of income. Relying solely on Social Security will not be enough. Just consider the average monthly Social Security check in 2016 was $1,341, according to the Social Security Administration. That’s just over $16,000 per year.
So investments, workplace retirement accounts, housing, and inheritances will also come into play when tapping sources for retirement income. Choosing which assets and accounts to tap first, and which ones you should try to preserve, is the next obstacle you’ll face. Your decision can impact how much you pay in taxes and what you may be able to pass along to a spouse or other family members after you pass away.
Investing Requires Taking Risks
Conservative investors who feel more comfortable in the bond market are feeling the pain of our low- interest rate environment. Based on research from financial experts, this trend is not going away anytime soon. This long period of low rates has burdened conservative investors, who do not feel comfortable investing in higher yielding stocks and mutual funds.
The challenge that many investors face is that their investment returns are not outpacing inflation, which means, for the long-term, that they are net-negative in their investment savings. Look beyond bonds for income.
One option you can consider is to adopt a total return strategy, rather than seeking income. Adding an allocation to dividend-paying stocks offers a way to diversify a total return portfolio. But keep in mind these stocks have, historically, had a close relationship with interest rate changes—prices for dividend stocks fall when rates rise, as investors are attracted to the higher yields available in relatively less risky bonds.
Another option to consider is to withdraw assets when you rebalance your portfolio. Instead of exchanging investments to return to your target allocation, you could instead sell assets that have appreciated and return that allocation back to its target level. These appreciated assets will often be stocks and equity holdings, so reducing this allocation can also help you keep your exposure to risk in check.
A Partner in Peace-of-Mind
Before you make any move, talk with a financial adviser to assess your goals and consider your options. Andersen Wealth has proprietary investment strategies for every risk category. Contact Andersen Wealth Management to schedule a retirement plan review and learn about strategies that reduce the worry about outliving your assets.
This information is solely for informational purposes. Andersen Wealth Management is a Registered Investment Adviser. Advisory services are only offered to clients or prospective clients where Andersen Wealth Management and its representatives are properly licensed or exempt from licensure. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. No advice may be rendered by Andersen Wealth Management unless a client service agreement is in place.