One of the greatest challenges of retirement is ensuring that your finances last as long as you live. You can ensure you have some money coming in regardless of how long you live through;
Social Security. This is the first line of defense to help you avoid outliving your savings since these payments are remitted and adjusted for inflation for the rest of an individual’s life. People who qualify for Social Security never completely run out finances; however, they may have to cut the standard of living to enable them survive on the Social Security payment when they exhaust other sources of income. It is vital to enhance the money you will obtain because this is the major source of income most retirees depend on. You can boost your Social Security payment by claiming spousal payments, having over 35 years of covered earnings and delaying your claiming up until the age of 70.
An annuity. Immediate annuities enable an individual to hand over a given portion of the retirement savings to an insurance firm in exchange for monthly payment for his entire life. Some annuities have high fees and costs and you cannot generally be able to pass the money you employed in buying the annuity on to heirs. However, you will gain a predictable monthly income regardless of how long you live as long as the insurance firm stays in the business. If you desire the lifetime guarantee, you will have to trade off access to the money. Most annuity companies will not give you the money back apart from the monthly paycheck once you hand over the money.
Systematic withdrawals. Disciplined investors are able to draw down their savings gradually in a manner that is capable of lasting for a long time. Lots of financial advisors often recommend withdrawing less than 3 to 4% of the retirement savings but this may be adjusted annually for inflation. This strategy has a demerit in that you may live longer than anticipated, your investments may perform poorly or you may fail to adhere to the plan and over spend as per the plan. However, the money will be available to be used for emergencies. If you pass on sooner, your hairs get the money. With this method, if you have a poor investment experience or live longer, you may run out of cash or you may die early before the money is finished and leave a lot of money to charity or your heirs.
Pay off your mortgage. When you pay off your mortgage, a major monthly bill is eliminated which enables you to use the savings for other expenses apart from housing. Your home’s equity may also be tapped for greater emergencies through a reverse mortgage or a second mortgage.