How to Make Your Savings Last a Lifetime

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You’ve been saving, living below your means and putting money toward your 401(k) plan. However you decided to put away money for retirement, you now have a portfolio of assets, plus your Social Security and if you are lucky a pension, so now you can enjoy a comfortable income, right? Wrong.

Remember the financial crash of 2008 and 2009? It has happened before and it could certainly happen again. A stock market decline might not happen in the near future, but it does happen and you could be retired for over 20 years the next time it does.

The best solution, don’t worry and start to plan. Here are five ways to defend your retirement nest egg against the uncertainty of life:

  1. Bulk Up Your Savings: You’ve heard the saying before, but we’ll remind you “Cash is King” and there is good reason for that. If you aren’t retired yet, keep saving…more. One you are over 50 you can add extra money to your 401(k) and IRA. Also, there is no law against saving more money outside your retirement account. So start bulking up your savings account. Its always good to have some cash on hand. Experts recommend keeping six months or even a year’s worth of expenses in cash, outside of your retirement account, in a bank or money market mutual fund. It’s a safety net, in case you face an unexpected medical bill, home repair or other expense.
  2. Plan for a Major Medical Expense: No one wants to think that something bad can happen, but its always good to have a plan…just in case. You may have a top-notch insurance plan, but a serious medical problem could hit you with serious out-of-pocket expenses. Keep in mind that even with the best plan some insurance plan you still might have a deductible.
  3. Consider Long-Term Care Costs: Even if you don’t have a major medical issue, you  might become disabled later in life. Who’s going to take care of you? Maybe you have a friend or family member who is prepared, but maybe you don’t. So you  might want to consider looking into long-term care insurance, these polices are expensive, but in the long run could save you thousands of dollars per year and the premium is often tax deductible.
  4. One Word: Annuity: Annuities are contracts with an insurance company. You give them money, and they provide you with a steady income for a period of time, usually life. Today is not a great time to buy an annuity because the amount of benefit depends on interest rates and interest rates are currently quite low. But that doesn’t mean that the option is completely out of the question. If you believe you are going to live longer than the average person, an annuity might pay off for you. The payments are not that generous, but they do continue for the rest of your life, so you’ll always have some money coming in.
  5. Downsizing is Key: Now is a perfect time to downsize. You no longer need that 3 or 4 bedroom house with a huge backyard and a two-car garage, because you don’t have as many people living with you. Sure, a few rich people can afford to keep their summer house in the Hamptons and their apartment in the city, but most of us move on from that stage. So maybe its time to stop paying for your old lifestyle and start taking care of your new retired life.

 

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