Although retirement is a period of life many people get excited about, there's also lots to worry about. You may be concerned about your health declining, your social circle shrinking, and your days not being as busy or fulfilling as you'd them to be.
And then there's the money angle. It almost doesn't matter whether you've saved $300,000 for retirement or $3 million. You may have the nagging fear that, eventually, you're going to run out of savings.
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That was a concern expressed by 51% of respondents in a recent Northwestern Mutual survey. And if it's a big worry of yours, here's what to do about it.
1. Have a flexible withdrawal plan
If you randomly take withdrawals from your savings, you might increase your risk of running out of money. But if you go in with a plan, that's less likely. However, be willing to flex that plan based on market conditions.
For years, financial experts swore by a 4% withdrawal rate with inflation adjustments. But Morningstar stress-tested that guidance in recent years and came up with different results based on market trends.
In 2021, Morningstar found that 3.3% was a more optimal withdrawal rate than 4%. It then shifted its guidance to 3.8% in 2022, 4% in 2023, and 3.7% in 2024.
What this means is that rather than stick to the same withdrawal rate throughout retirement, it pays to adapt to market conditions. With a few tweaks, you could increase the likelihood of your savings lasting.
To pull this off, you may need to be flexible with your budget and spending. That could mean taking smaller trips some years, or reducing other bills as necessary. It's a sacrifice, but it may be worth it for the peace of mind.
2. Get a part-time job
If being bored in retirement is almost as big a fear of yours as running out of money, then working in some capacity during your senior years can serve two purposes: It can give you something to do, and it can take some of the pressure off of your nest egg.
The nice thing about today's workforce is that the gig economy is booming. This means that part-time work in retirement doesn't have to tether you to a schedule you may not want to be bound to. You can even pursue gig work you might find fun, whether it's designing jewelry, selling baked goods, or caring for pets.
3. Boost your Social Security benefits
People who delay Social Security past full retirement age, which is 67 for anyone born in 1960 or later, get rewarded in the form of larger monthly checks. For each year you hold off on claiming benefits beyond that point, your benefits rise 8%.
This incentive only lasts until age 70. So if your full retirement age is 67, the maximum Social Security boost you can get is 24%. However, that's still a very large increase. And if you're able to wait on Social Security until 70, you can set yourself up to be far less reliant on your savings.
It's natural to worry about running out of money in retirement. But try not to let that fear consume you. If it does, you won't be able to enjoy the money you worked so hard to save. Instead, take these steps to reduce the chances of outliving your savings so you can focus on making the most of your senior years.
