By Art Koff as seen in MarketWatch
According to a just-published HSBC Holdings publication 59% of those surveyed said financial security is one of the things they value most in life and 67% said a priority is having enough money for a comfortable life in retirement.*
The focus of this column is on what you can do to make sure you have enough funds to live the lifestyle you hoped to live during your retirement years and not run out of money.
Perhaps the most important single thing you should consider is to make sure your spending is at a level so that you will not run out of money. Your monthly income from investments, Social Security, pensions and other areas coupled with your withdrawal from principle must be adjusted to last you well into your 90s. This spending must include additional funds put aside for unexpected expenses like health-care problems not covered by Medicare and insurance.
It is very difficult to accurately estimate the balance between spending and income even with sound advice from a financial advisor. You must estimate your expenses, and to be safe, you must plan to have a good deal of your wealth left at the end of your life.
Step 1. Project your life span using a reliable calculator like the one from the Social Security Administration.
Sept 2. Create a budget that includes your projected monthly expenses. Include your yearly expenses and special onetime expenses separately. Vanguard has a Retirement Expenses Worksheet which should be helpful.
Note: Retirees have a tendency to substantially underestimate what they may spend on health care so estimate this area with particular care.
Step 3. Create a list of income and assets. Does your income from retirement savings coupled with Social Security benefits, pensions, etc. match your expenditures, and if not, how much must be taken from assets to cover the shortfall? Needless to say, expenses must be adjusted, as when assets are sold, this further reduces the income they produce.
Step 4. Estimate how long you will work. If it seems that your income will be far less than your expenditures consider continuing to work longer either for your current employer or on a part-time, temporary, seasonal or project basis. See here for information and help.
You can also considering working from home. See here where you can find information about hundreds of companies that provide at home work solutions. Also, you can consider starting a small business or even purchasing a franchise to generate income. See here for more information.
Be aware that if you continue working after you are receiving Social Security there will be a with-holding of $1 for every $2 you earn over $15,720 (2016 figure).
Here you can view 11 calculators from the U.S. Government including a Social Security retirement estimator and a early or late retirement benefit calculator.
MarketWatch columns to reference