How to Avoid Running Out of Money in Retirement
A New York Life survey found that 58% of Americans overestimate how much they can safely withdraw from retirement savings. More than three in ten believe they can spend ten percent or more of their savings each year, yet at that rate they would exhaust their savings in 11 years or less. Here’s why retirees should count on withdrawing only 2.8% of savings annually. Anything more than that significantly increases your chances of running out of money in retirement. Given that rule, with a nest egg of $250,000, you could withdraw just $7,000 per year.
Yet only 14 percent of Americans have even that much in savings. And the percentage of Boomers confident they’ll have enough money to last throughout retirement has dropped to 24 percent, according to the Insured Retirement Institute’s Boomer Expectations for Retirement 2016 Survey. To help you prepare better and ease your retirement fears, I recommend following this Six-Step Action Blueprint:
- Acknowledge the Problem – Putting off retirement planning only makes matters worse.
- Increase Savings by 1% to 2% Every Year – You won’t feel a pinch and you’ll boost your long-term results.
- Realistically Plan for How Long You’ll Live – One in four people turning 65 today will live past 90, making it more important for everyone to save for the long haul.
- Don’t Underestimate the Impact of Inflation – Do your planning based on the true future cost of living rather than wishful thinking.
- Don’t Count on Working Longer to Make Up for Your Savings Shortfall –Almost half of today’s retirees were forced to leave the workforce earlier than planned.
- Prioritize Building an Emergency Fund Equal to Two Years of Household Income – Why everyone needs more than a few months of savings socked away.
Pamela Yellen is a financial investigator and the author of two New York Times best-selling books, including her latest, “The Bank on Yourself Revolution: Fire Your Banker, Bypass Wall Street, and Take Control of Your Own Financial Future.” Pamela investigated more than 450 financial strategies seeking an alternative to the risk and volatility of stocks and other investments, which led her to a time-tested, predictable method of growing wealth now used by more than 500,000 Americans. Please visit www.BankOnYourself.com.