10 Retirement Options To Help Your Money Last Longer

retirement options

For many, the idea of running out of money during retirement is terrifying. After all, a person’s golden years can be surprisingly expensive, and people are living longer today than they did in many generations before. Couple that with concerns about another recession, the rising cost of healthcare, and inflation, and coming up financially short could easily become one of a person’s biggest fears. Luckily, there are retirement options that can help your money last as long as possible. Here are ten.

1. Maximize Social Security

While the idea of receiving Social Security benefits at age 62 might be appealing, waiting can pay off. If you start too early, your benefit is much smaller than if you delay a few years. Waiting until you reach full retirement age should be considered essential. That way, you don’t get a reduced benefit.

Your full retirement age depends on the year you were born. Here is an overview based on a person’s year of birth:

Year of Birth Full Retirement Age
1950 or before Already at full retirement age
1951-1954 66 (all will be at full retirement by the end of 2020)
1955 66 and 2 months
1956 66 and 4 months
1957 66 and 6 months
1958 66 and 8 months
1959 66 and 10 months
1960 or later 67

However, if you can wait until age 70, that’s even better. You’ll earn delayed retirement credits that boost your Social Security payment. For every year between your full retirement age and 70, your payment rises by 8 percent. That means, if 67 is your full retirement age, by waiting until age 70, your payment is 24 percent higher than it would be if you didn’t wait.

2. Consider a Lifetime Annuity

Depending on your financial situation, a lifetime annuity might be a smart addition to your retirement planning. In exchange for a lump sum, you’ll receive a set amount every month for the remainder of your life, regardless of how long it is.

It’s important to take care when exploring annuity options. Some come with incredibly high fees, degrading the value of the product. However, if you are using one as a supplement and not a primary source of retirement income, annuities can be worth exploring.

3. Work Part-Time or Freelance

One of the easiest ways to make your retirement money last is to keep working, at least in some capacity. This could include a part-time job that provides you with some extra cash, using freelance work to bolster your bank account, starting a blog that generates income, or any other approach that works for you.

Retirement can actually be a great time to take on a job that you enjoy without having to consider the impact on your career or long-term earning potential. Plus, it can help you stay active and engaged in your community, and that is a great benefit.

4. Shift Your Savings to a High Yield Account

The average savings account interest rate, according to the FDIC, is a measly 0.09 percent. Some banks offer even less, coming in at just 0.01 percent interest.

If your money is sitting in an account like that, you are missing out on an earning opportunity. Just by moving your cash to a high-yield online savings account, you can earn more in interest with zero effort.

For example, $5,000 sitting in an account that earns only the average 0.09 percent brings in $4.50 in interest every year, suggesting the account compounds monthly. In comparison, with an interest rate of 1.5 percent, that money earns $75.52 in interest instead. That’s a difference of $71.02 every year. And it happens even without having to deposit any additional money.

Look for an option with an interest rate of 1 to 2 percent or more. That way, if you have money in savings for emergencies, it’s making you as much as possible.

5. Reexamine Your Portfolio

As you get closer to retirement, it’s normal to skew your portfolio toward the conservative end. That way, your odds of preserving your money go up, but you still have a chance of experiencing some decent gains.

However, if your portfolio has been adjusting automatically or without your direct input, you might want to see if the allocations are appropriate. It’s possible that your portfolio is more conservative than you’d like, particularly if you decide to retire later in life than you did when you first set up your allocations.

Similarly, many people could potentially live decades after retiring. That means you could have 20, 30, or 40 more years to live. That means you have some time to ride out a degree of market volatility, so keeping at least a portion of your retirement account in stocks could be a wiser choice.

If you are delaying your retirement by a few years or could potentially have a lengthy retirement, explore whether being more aggressive makes sense for you. It may let you earn more before you retire, so it is worth considering.

6. Factor in the Value of Downsizing in the Future

If you will pay off your house before you retire and are in a family-sized home, then you can factor in the value of your property when planning for your retirement. Once it’s paid off, if you choose to downsize, any excess value above the cost of your new housing arrangement could be an income boost.

Even if you wouldn’t plan on shifting to a smaller home, it’s wise to examine the value difference. That way, your property could function as a safety net, giving you a source of cash should your other retirement accounts dwindle down faster than you expected.

However, if you downsize when you retire, you are creating a way to stretch your retirement income. A smaller property is usually less expensive to maintain, operate, and insure. As a result, your monthly expenses could go down, allowing you to stretch your dollars further.

7. Take Advantage of an HSA

If you aren’t enrolled in Medicare yet and are eligible to open a Health Savings Account (HSA), consider doing it as part of your retirement planning. While you can’t contribute once you enroll in Medicare, you can add to the HSA until that day comes.

With an HSA, contributions are tax-deductible. Plus, it grows tax-deferred and, as long as you use the funds for qualifying healthcare expenses, you can withdraw it tax-free.

Even if you are no longer eligible to make contributions, you can keep using the saved money until it is gone. Since healthcare costs tend to rise as a person ages, this can be a great way to plan for managing retirement expenses. Then, your other retirement account funds don’t have to go to medical costs.

8. Readjust Your Life Insurance

While it might seem like adjusting your life insurance as you get closer to retirement isn’t a great idea, it might be. If your children no longer live at home and don’t depend on you financially, you might not need as much insurance as you did when they were younger.

If you haven’t examined your policy recently and your household’s situation looks different than it did when you signed up, see if reducing the size makes sense. In some cases, it may, allowing you to cut a monthly expense and still have a suitable amount of protection.

9. Make a Tax-Smart Withdrawal Plan

If you have more than one type of retirement account, then making a tax-smart withdrawal plan is a good idea. Certain kinds of accounts – like traditional IRAs and 401(k)s – have taxable withdrawals while others – like Roth IRAs – don’t. Aside from any mandatory withdrawals, make sure you consider the tax implications when you access the money. That way, you can choose an approach that may minimize your obligation, allowing you to keep more of your money.

10. Move to a State with Lower Taxes or Cost of Living

Some states have higher tax rates than others. Income, property, and sales tax rates can vary dramatically, so moving to one that has better options than where you live now can help you stretch your money.

Similarly, the cost of living isn’t the same in every state or city. Some are much more affordable than others, so you might be able to make your money last by opting for a change of scenery.

If you don’t have a reason to stay in your current area, compare how much you could save by heading elsewhere. Just make sure to factor in taxes and the cost of living. That way, you can genuinely find the most affordable option for you.

Do you know of any other retirement options that can help make the money last longer? Share your thoughts in the comments below.

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