by Alicia Wanek
A recent study revealed that over 40% of millennials are anxious about depleting their retirement savings. Just imagine how many seniors share this worry! My grandmother used to say that if she met her Maker with just a penny left, it meant she had managed her finances wisely. While that might be a bit too extreme, it raises an important question: what can seniors do to stretch their hard-earned savings throughout their retirement years?
Reduce spending moderately
Many seniors likely experience lower expenses. With the children grown and perhaps having paid off a mortgage or downsized their living space, monthly costs are often reduced. Although retirement calculators typically suggest living on about 80% of pre-retirement income, if you can adjust this to 66%, your funds will last significantly longer. However, being overly frugal could mean missing out on enjoying your retirement. Chuck Cowell, Dallas Market Chairman of Guaranty Bank & Trust emphasizes, “Go enjoy life. That’s what you saved for.”
Determining how to prioritize spending should be a joint conversation among you, your spouse, and possibly your adult children, ensuring everyone is aligned. “Decisions regarding downsizing, traveling, or making significant purchases are best addressed collectively,” advises Craig Greenway from SFMG Wealth Advisors. Including a financial advisor in these discussions can help assess your portfolio and aid in reaching your financial objectives.
Explore long-term care insurance options
Long-term care insurance assists in covering the costs related to essential daily activities, which are often not included under health insurance, Medicare, or Medicaid. Approximately 60% of individuals aged 65 and over will require some form of long-term care during their lives. Chuck notes, “Investing in quality long-term care insurance now will significantly benefit you in facing future challenges and tough decisions.” Moreover, purchasing a policy at a younger age often leads to lower premiums; over 40% of those over 70 applying for coverage get denied compared to just 7% of applicants in their 50s, so it’s wise to act promptly.
Bobby Davidson, a local independent insurance agent, highlights a newer option: guaranteed universal life policies with a long-term care rider. He considers this a “fantastic hybrid” combining the features of term life insurance and long-term care insurance. It’s advisable to consult with your insurer to find the most suitable policy. Estate attorney Colin Smith advises thoroughly reviewing the terms of any long-term care policy and ensuring you understand the fine print. If needed, have your lawyer go through the legal details.
Implement the 4% withdrawal strategy
The premise is that if your retirement savings need to last for 30 years, you can initially withdraw 4% from your portfolio in the first year and then adjust that amount each year to account for inflation. Following this strategy provides a high probability of not outliving your savings. However, it’s essential to regularly meet with your financial advisor to reassess your financial situation. Chuck points out that recent low-interest rates may pose challenges in keeping up with inflation, even though rates are starting to rise again. The 4% rule may not suit everyone, but it highlights the importance of having a strategy for utilizing your savings.
Seniors today are experiencing life in a way like never before. The aim is to ensure that this stage of life isn’t overshadowed by financial worries. By making informed financial decisions, you can focus on the other meaningful aspects of life. Show those worried millennials just how rewarding senior life can be!
