Even if you’ve planned carefully and your retirement nest egg is hefty, there’s always a possibility that you’ll outlive — or outspend — your money.
Worried about running out of money? Take these steps to alleviate your concerns.
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1. Buy longevity insurance
With longevity insurance, you give the insurance company a relatively small chunk of change at age 65. The insurance company invests it until you turn 80 or 85 and then begins paying you monthly payments for the rest of your life. A typical policy might cost $25,000 at age 65 and pay out $3,000 per month beginning at age 85.
The money comes at a point in life when you’re likely to start having hefty medical bills combined with 20 years’ worth of inflation that may have diminished your resources.
This approach also makes long-term planning easier because the payout is determined when you buy the policy. You can confidently spend more of your other assets if you know they’ll be replenished at a predetermined point.
The biggest drawback is that if you die early, you won’t get your money’s worth.
2. Delay taking Social Security
If you start receiving benefits at your full retirement age — 66 for many people retiring in the next few years — you’ll get 100 percent of your monthly benefit. If you delay receiving retirement benefits until after your full retirement age, your check continues to increase.
For instance, if you wait until age 67, you’ll get 8 percent more for delaying benefits for 12 months. At age 70 — the longest you can wait — you get 32 percent more than you would have gotten at full retirement age. These percentages will differ slightly among recipients because working longer increases the amount they have paid into the system and those who earn more get more.
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3. Ladder your bonds
Laddered bonds can give you a financial safety net and flexibility when interest rates rise or fall.
Here’s how a bond ladder works: You buy equal numbers of Treasury bonds due to mature in one year, three years, five years, seven years and nine years, so your portfolio has an average maturity of five to six years. The short terms keep you from tying up all your money, and the long terms offer higher returns.
4. Get a job
A part-time job can put some extra cash in your wallet and also allow you to delay withdrawing from your retirement accounts or Social Security.
Here are 10 part-time jobs that are perfect for retirees.
5. Consider long-term care insurance
It’s hard to predict how much medical care you’ll need in old age.
In a traditional long-term care insurance policy, the company promises to pay a daily benefit to help cover the cost of long-term care if the policyholder is unable to perform a specified number of what the industry calls “activities of daily living”: bathing, dressing, eating, getting from a bed to a chair, using a toilet and walking.
But all policies aren’t created equal. The best ones pay a flat rate per month that allows the insured person who meets the basic qualifications to spend the money as he or she sees fit. That could include spending it on a nursing home, a family caregiver or even a cruise to the Bahamas.
There are also whole life insurance policies and single premium annuity policies that have long-term care riders. The insured person who qualifies as needing care can use some or all of the policy to pay its costs. Again, how the money is spent is generally up to the insured. If the money isn’t needed for medical care, then it passes tax-free to heirs.
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