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Securing Your Retirement: Strategies for Making Your Savings Last

As you approach retirement, managing your savings effectively is crucial to ensure that your money lasts as long as you do. Consider this scenario: you have $1.3 million in a 401(k) at age 59, but a 4% withdrawal rate would only generate $52,000 per year. This may not be enough to cover your living expenses, and you risk running out of money by the time you turn 90.

Understanding Longevity Risk

Longevity risk is the possibility that you will outlive your savings. Managing this risk is like playing a hand of poker – you know some of the details, but not all of them. You can control your spending, but you can’t predict how long you’ll live. As Steve Davis, CEO of Total Wealth Academy, puts it, “There is no expiration date on the bottom of your foot.”

Strategies for Mitigating Longevity Risk

To mitigate longevity risk, consider the following strategies:

• Overestimate your lifespan: Plan for a longer life expectancy to ensure you don’t run out of money.
• Build an income portfolio: Create a portfolio that generates income without drawing down on the underlying principal.
• Diversify your assets: Allocate your assets across different classes and investments to manage risk.
• Consider annuities: Annuities can provide a guaranteed income stream for life.

Retirement Income Planning

Retirement income planning involves creating a sustainable income stream from your savings. Consider the following:

• Social Security benefits: Maximize your Social Security benefits by delaying your claim or increasing your earnings.
• Tax-efficient withdrawals: Plan your withdrawals to minimize taxes and maximize your after-tax income.
• Inflation protection: Invest in assets that keep pace with inflation to maintain your purchasing power.

Working with a Financial Advisor

A financial advisor can help you create a customized retirement plan tailored to your needs and goals. They can help you:

• Assess your risk tolerance: Determine your comfort level with risk and create a plan that aligns with your goals.
• Develop an investment strategy: Create a diversified investment portfolio that meets your needs.
• Optimize your tax strategy: Minimize taxes and maximize your after-tax income.

By working with a financial advisor and implementing these strategies, you can increase the chances of making your savings last throughout your retirement.