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Tips To Ensure You Don't Outlive Your Retirement Funds


February 9, 2022 ( Newswire) Fidelity suggests that you should save at least 15% of your pre-tax salary for retirement every year, according to a report on Forbes. The report further states that to retire comfortably at 62 years, you should start saving at age 25. Unfortunately, 70% of workers aren't saving enough for retirement. Failure to save enough for your retirement is one of the biggest financial regrets you'll ever have. There's a likelihood you might outlive your retirement savings, making your golden years more stressful rather than exciting. To ensure you have enough money to cater to all your needs after retirement, check out these tips on how to ensure you don't outlive your retirement funds.

Calculate How Much Money You'll Need After Retiring

The first step to ensuring you don't outlive your retirement savings is knowing how much you'll need throughout your golden years. To determine how much money you need for retirement, factor in your annual expenses. Make sure to add mortgage payments or rent, transportation, groceries, healthcare, and travel costs.

After adding your yearly expenses, you should consider the amount you'll be receiving through Social Security or other federal benefits. Then subtract your Social Security benefits from your estimated yearly expenses. For instance, let's say your expenses every year amount to $55,000 and expect $25,000 from Social Security. You'll subtract $25,000 from $55,000 to get the amount you'll withdraw from your savings, which is $30,000. Then multiply $30,000 by 25 or divide by 0.04, based on the 4% rule. In this case, your target savings amount will be $750,000.

Invest In IRA

If your employer doesn't have a retirement savings plan like a 401k, you can still save more by opening a traditional IRA or Roth IRA account. Note that a traditional IRA account lets you save pre-taxed money, meaning you'll only pay tax when you withdraw funds after retirement. On the other hand, Roth IRA or self-directed IRA allows you to save post-taxed money. This means you won't receive a tax bill when you withdraw funds.

Investing in a self-directed IRA is beneficial in several ways, such as having complete control of your financial future, the opportunity to invest in various markets, and being a source of investment capital. For instance, let's say you want to invest in real estate but don't have enough funds. You can borrow a loan against an IRA to invest in property. The beauty of these loans is that the asset you're financing acts as collateral. So, if you default on a loan payment, the lender can only seize the asset financed by your IRA loan.

Stay Employed For One More Year

If you're about to retire, working for another one or two years is one of the excellent ways to increase your retirement savings. Ideally, you'll have extra time to save and allow your assets to grow. You'll also have less time to spend all your money while you're not working. Plus, your federal benefits will be higher since Social Security adds an extra 8% on delayed credits until you hit 70.

Saving enough money for retirement is key to making the most of your golden years. To ensure your finances sustain you throughout retirement, invest in IRA and stay in the workforce a little longer. Also, know how much money you need to cater to your needs during retirement and save accordingly.

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