You may be approaching retirement, in retirement already, or just planning. Either way, thinking about your retirement savings is never a bad idea.
Protecting savings to ensure they last through your whole retirement is essential. After all, it’s something that you’ve worked hard for. Enjoying it without having to worry about money is possible. But, you’re going to have to think ahead and make the right plans.
Here, we’ve compiled the best ways to protect your retirement savings. If you’re aiming for a comfortable retirement of 30 years, these are important tips to help you along the way.
Read on to learn the best ways to protect your retirement savings.
1. Planning For Your Healthcare Costs
Managing healthcare costs is an integral part of retiree life. Throughout history, medical costs have risen faster than inflation. This is especially true for long-term care.
As you grow older, you can expect more health problems to crop up. Also, long-term care is an option that many elderly people need in their later years. These are all factors that you need to take into consideration when you’re looking at your retirement savings.
When you’re thinking about retirement savings, note the rising costs of healthcare.
According to Fidelity’s estimate, a 65-year-old couple retiring this year will need around $285,000. This will cover their healthcare costs for the rest of their retirement. This is a figure they reached by using average life expectancy.
Many will live longer than this average. So, protecting your retirement savings means putting aside some money specifically for healthcare.
2. Prepare for Inflation
Inflation can affect your retirement savings. This happens when it increases the cost of products and services in the future.
Over time, it slowly erodes your purchasing power. Even a low inflation rate can have a significant impact on the finances of a retiree.
Some pensions, as well as Social Security, help you keep up with inflation. They do this by adjusting the cost-of-living. But, this alone is not enough.
There are other ways to help protect against inflation. One way which may help is in real estate. Investing in real estate may help protect your savings as the cost of real estate rises along with inflation. This has been the case for many years, but the one caveat was in 2008 when the housing market took a hit and it took some years for it to come back.
This means that it may be best to own your own home rather than rent. This way as the cost of housing so does your home and it helps stabilize your cost of living.
Another way to have your retirement money keep up with inflation is to have part of it in security investments.
These may include stock mutual funds and treasury-inflation protected securities (TIPS). TIPS are bonds guaranteed to keep up with inflation using the Consumer Price Index.
Investing in stocks is another way to mitigate inflation risk.
3. Get an Umbrella
You can add personal umbrella insurance to other policies. This means you can add it to auto insurance and homeowners insurance to cover costs.
One main advantage of umbrella insurance is a legal defense. With it, during a lawsuit, the insurance company provides you with a legal protection.
This happens on top of your coverage. But note that intentional acts, punitive damages, and business activities are not covered. Umbrella insurance policies is a way to help safeguard your retirement savings.
4. Withdraw In Moderation
If you’re already in retirement, you’ll be making regular withdrawals from your savings. But spending these savings too fast can put your retirement income at risk. Thus your withdrawals should be conservative.
Looking at history, Fidelity has calculated optimal withdrawal rates. Their study targets retirement to last 20 to 30 years. For comfortable spending, you should avoid withdrawing more than 5 percent in the first year. Following the first year, adjust the percentage for inflation.
Remember that you worked long and hard to make your retirement savings. So, avoid the temptation to spend your savings after retirement. The temptation will be stronger since you will have more free time.
Some people have the opposite reaction. Switching from saving for retirement to spending retirement savings can be stressful. But with time, you can adjust both to spending and moderation.
Are you interested in more retirement savings advice? We have knowledgeable financial professionals who can guide you through retirement finances. They can also assist you with other types of wealth management.
Contact us or visit our site for more information.
This educational third-party material is being provided by Luke Will Director of Investments as a courtesy.
Material discussed is meant for general informational purposes only and is not to be construed as tax, legal, or investment advice. Although the information has been gathered from sources believed to be reliable, please note that individual situations can vary. Therefore, the information should be relied upon only when coordinated with individual professional advice.
Registered Representative and Financial Advisor of Park Avenue Securities LLC (PAS). Securities products and advisory services offered through PAS, member FINRA, SIPC. Financial Representative of The Guardian Life Insurance Company of America® (Guardian), New York, NY. PAS is an indirect, wholly-owned subsidiary of Guardian. Navigation Wealth Management is not an affiliate or subsidiary of PAS or Guardian. Navigation Wealth Management is not registered in any state or with the U.S. Securities and Exchange Commission as a Registered Investment Advisor. 2019-87086 Exp. 10/21