One of the biggest fears retirees tend to share is running out of savings. Given that you don't know how long you'll live, what inflation will look like, or what your expenses will amount to exactly, that's understandable.
The good news is that the right combination of strategies could help you avoid a scenario where your savings balance goes to $0. Here are three things you can do to increase the odds that your money will last as long as you need it to.
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1. Delay Social Security
Social Security is guaranteed for life and adjusted annually for inflation. That's why delaying benefits can be a savvy move.
Although you can claim Social Security as early as age 62, waiting increases your monthly checks. You'll get your benefits without a reduction if you hold off on filing until full retirement age, which is 67 if you were born in 1960 or later. And for each year you delay past that point, your benefits get an automatic 8% boost.
Delaying Social Security could provide more ongoing income while reducing the need to tap your portfolio. That combination could be a game changer.
2. Consider an annuity for guaranteed income
One of retirement's biggest challenges is managing the uncertainty of how long you'll live. An annuity can help address that risk by converting a portion of your savings into guaranteed lifetime income.
With an annuity, you pay an insurance company a lump sum in exchange for regular monthly payments that can continue for life. But while that may give you peace of mind, you should know there are some trade-offs.
Annuities often involve costly fees and come with complex contract terms. Also, you may need to take a chunk of money out of your savings to buy one, which could impact legacy plans you might have. But combined with other strategies, an annuity could help you sleep better at night knowing you have guaranteed income coming your way.
3. Maintain a cash cushion for market downturns
Market downturns are a pretty typical occurrence. But when you're retired and are tapping your savings for income, a downturn can be risky.
One way to reduce that risk is to maintain a cash reserve that covers one to three years of essential living expenses. During a down market, you can use that cash instead of selling stocks or other assets if they've lost value to pay your bills. Once the market recovers, you can then replenish your cash reserve by selling investments that have regained value.
Running out of money in retirement is a legitimate fear. These moves could reduce the chances of it happening, allowing you to enjoy less financial stress during your senior years.
