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Will your retirement money last as long as you do?

If you worry that your retirement savings won鈥檛 last as long as it needs to, you鈥檙e not alone.  According to EBRI鈥檚 , just two in ten workers are very confident in having enough money to live comfortably in retirement. Knowing how long your money needs to last may be one of the biggest unknowns in retirement planning. Although the future can鈥檛 be predicted, at birth, American men born in 2021 are expected to live 73.2 years and women 79.1 years, reports the . That means a couple turning 65 can expect to live together in retirement for another 8 years, on average, but potentially longer. That鈥檚 great news considering the time many retirees may have to enjoy the next chapter of their lives. The downside? Many people are concerned about running out of money during retirement.

By acknowledging that retirement doesn鈥檛 have to signal the end of savings, you can build greater financial confidence and help make your money work for you. While saving money is often a priority during our working years, it can still be a focus as we near or enter retirement.  Creating a diversified financial plan can offer opportunities to further grow your retirement savings for the years ahead, while helping reduce the impact of retirement risks like inflation, longevity and market volatility. 

Divide and conquer

To help maximize your savings, one strategy is to take a retirement portfolio and divide it into three different buckets based on when you may need income. Planning this way can help ensure that you'll have what you need for as long as you need it.

1. The first bucket is for the first five years of retirement.

An immediate annuity, for example, can pay a guaranteed amount for a specified period in exchange for a lump sum of money. This can be helpful when you鈥檙e  in the early stages of retirement and are ready to turn a portion of your savings into a source of guaranteed income.

2. The second bucket is for years six through 15 of retirement.

It should be relatively safe from inflation and market volatility while still earning interest. For example, using a fixed indexed annuity (FIA) allows any interest earnings to be locked in, while helping keep them protected from loss due to market downturns.¹ Plus, FIAs can also be used to create a guaranteed income stream that can be a 鈥渞etirement paycheck鈥� for the rest of your life.²

3. The third bucket is for a longer time frame 鈥� year 16 and beyond 鈥� so you can afford to be a bit riskier.

You may have more time to let that money grow and recover if there is a market downturn. One solution to consider is a registered index-linked annuity (RILA), which can offer higher growth potential than a FIA. RILAs may help you accumulate money based in part on growth in a published stock market index, while also providing a measure of protection from loss if the index declines in value.

The bucket strategy can help provide a systematic approach to managing retirement income and expenses, offering a balance between liquidity, stability and growth potential while helping address short-term and long-term financial needs.

Live now as you plan to later

Another way to help ensure that your money lasts throughout retirement is to start living now as if you are already retired. Test-driving your retirement can help you set a realistic retirement budget and give you ample time to make adjustments to your financial plans before your actual retirement. Before officially transitioning to retirement, helpful steps include: 

• Calculate expenses, such as housing, transportation and health care costs
• Cut back on unnecessary expenses and prioritize essential needs
• Start living on your projected retirement budget to see if it fits
• Adopt any planned lifestyle changes (like downsizing to a townhouse or becoming a one-car household) 

By taking a retirement test-drive, you can gain valuable insights into your financial readiness, identify potential gaps and make informed decisions that can help enhance your retirement preparedness. 

Want the most from your retirement? Get smarter with Smart Strategies from 麻豆传媒. Your source for tips, tools and financial solutions that can help you live your best life.

This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.

¹Fixed indexed annuities are not stock market investments and do not directly participate in any stock or equity investments. Market Indices may not include dividends paid on the underlying stocks, and therefore may not reflect the total return of the underlying stocks; neither an Index nor any market-indexed annuity is comparable to a direct investment in the equity markets. Clients who purchase indexed annuities are not directly investing in a stock market index.

²Lifetime Income Withdrawals may be reduced or may stop if you take Excess Withdrawals from your contract. If Excess Withdrawals, Withdrawal Charges, or applicable adjustments reduce the contract鈥檚 Accumulated Value to zero, your Lifetime Income Withdrawal Payments will stop and the rider will terminate.

Registered index-linked annuities have a risk of substantial loss of principal and related earnings. They are designed to be a long-term investment product used to help provide income for retirement and are not suitable as a short-term investment.
Guaranteed lifetime income is available through annuitization or an income rider. Income riders may be built into the contract or optional for a charge.

Indexed annuities are not stock market investments and do not directly participate in any stock or equity investments. Market indices may not include dividends paid on the underlying stocks, and therefore may not reflect the total return of the underlying stocks; neither an index nor any market-indexed annuity is comparable to a direct investment in the equity markets.