6 Steps to Help Protect Against Outliving Your Savings

When living a long and healthy life is a common goal, many people will be spending decades in retirement. Our retirement savings may need to last 25 to 30 years or more. That means knowing how to save for retirement is an important skill for everyone. 

When you’re considering retirement planning, there are important questions to consider. How much do I need to retire? When should I start collecting Social Security benefits? How do I know what percentage of income to save for retirement? And how do I make sure that I don’t outlive my savings? As you save and plan for retirement, you want to make sure you have the income you need for the years ahead. 

Protecting yourself against outliving your savings is important — and it’s possible. It just means creating and sticking to a plan. Here are six steps that can help your money last for the rest of your life. 

If you’re looking for help with your retirement savings, reach out to Farm Bureau.

Step 1: Aim to Save 15% of Your Income for Retirement

The general recommendation is to save 15% of your income, beginning as early as possible, 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%, you can 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.

Step 2: Think About When You’ll Start Collecting Social Security

You can start collecting Social Security as early as age 62, though you’ll receive reduced benefits until you reach full retirement age, which for people born in 1960 and later is age 67. (The age is earlier for those born before 1960, depending on their birth year.)

If you delay taking benefits until age 70, then your benefit amount will increase. Waiting gives you a higher benefit and your yearly cost of living adjustments will be based on this higher benefit level.  

However, 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. 

Step 3: Invest Your Money 

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. An agent or financial advisor can work with you to figure out which options fit your situation.

Step 4: See if You Can Enroll in a Health Savings Account

Health care expenses can be costly, which means you may end up spending a lot of money in retirement — both your income and your savings. One way to cover some of these expenses is with a health savings account (HSA). An HSA is a tax-deductible account in which interest and earnings grow tax-free and withdrawals for qualifying expenses are not taxed, either. 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.

Step 5: Look Into Long-Term Care Insurance

The cost of care from home health aids 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 and to alleviate a burden that may fall on your family members.

Step 6: 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. Bringing in extra income can add a cushion that eases stress related to money. 

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. Just remember that you may need to limit your hours if you’re collecting Social Security or other benefits, so check make sure you understand the ripple effects before taking on a part-time job.

Connect With Someone Who Can Help

Preparing for retirement is a complex process, but we can help. Reach out to Farm Bureau today.