retirement savings

How can you be sure that nest egg will last?

Here are some tips from a former investment advisor, who by following her own advice, has been comfortably retired with her husband for the past four years.

  • Before saying bye-bye to your paycheck, obviously the first thing you need to consider is the amount you’ve saved. To determine whether you have enough, take 4 to 5 percent of the total and add Social Security and any pensions. If that number isn’t sufficient to live on (with a small raise each year), then you need to keep working and saving.
  • You should also pay off everything, including credit cards, car loans and, if possible, your mortgage. If you can’t completely eliminate your mortgage, you may need to sell your home and downsize or even rent, allowing you to invest the profit (and if renting, avoid property taxes).
  • Create a realistic budget, including any mortgage and associated homeownership expenses, vacations, medical expenses and any large purchases. Then do your best to stick to it!
  • Don’t waste money on expensive life insurance premiums. If you have no debt and your kids are through college, your final expenses can be paid from your assets. You can even prepay your funeral expenses to save your family the hardship.
  • On the other hand, buying long-term care insurance is a smart investment as it gives you another bucket of bucks from which to draw when you can no longer care for yourself. But be sure to buy this insurance while you’re still relatively young (late 50s, early 60s) and in satisfactory health to get the best premium, and sometimes even to qualify.
  • A reverse mortgage, which gives you access to the equity in your home, can be a good option for extra cash, but only as long as you stay in your home. Once you sell, you’ll have to pay back the amount your borrowed and it’s possible to end upside down on your loan if the market isn’t good.

But the most important advice of all is to hire a professional. To avoid outliving your money, a financial advisor (preferably one who is fee-based rather than commission-based) can help you invest wisely, live within your budget and hopefully out-save your years!



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