Running Out of Money in Retirement Is Avoidable—If You Do This
"I'm going to run out of money."
That's the fear that stands between so many seniors and enjoying their Golden Years.
That's the fear that delays retirement five years too long.
The fear that causes new retirees to pinch every penny instead of buying a new car, joining their local country club, or travelling the world.
The fear that leaves so many seniors thinking "Coulda ... Woulda ... Shoulda ..." at the end of retirement.
In fact, according to a study by the Allianz Center for the Future of Retirement, 64% of Americans are more afraid of running out of money in retirement than they are afraid of death!
Today, I'm going to try to bring one of those fears down to size. Because, unlike dying, your odds of running out of money in retirement can be reduced, if not eliminated, with hard work, diligent saving, and comprehensive financial planning.
1. Look Beyond the "Finish Line"
No, retirement is not your "finish line."
It's the starting point of a new journey that hopefully will span twenty or thirty of your most fulfilling years.
And during that time, there will be ups and downs: with your family, with your mental and physical health, with the world, and, yes, with the financial markets. For most folks, there's no one "number" you can hit that's big enough to secure decades of retirement -- especially if your nest egg isn't part of a comprehensive, professionally managed planning strategy.
Once you stop seeing retirement as a one-time event, you'll start appreciating the full scope of your Golden Years. And if you're working with a financial advisor, you'll see those decades to come not just as a challenge but as opportunities for fun, happiness, and personal growth.
2. Create and Maintain a Dynamic Plan
Retirement isn't just a fixed point on your timeline, so a Keen Wealth comprehensive financial plan is never fixed in place either. Your financial plan should be every bit as dynamic as your life in retirement will be, and capable of adapting to your financial needs.
At least annually, we make an effort to sit down with folks to discuss:
- Spending Flexibility: Distinguishing between needs (housing, healthcare, food) and wants (travel, hobbies, dining out) and budgeting accordingly to find that personal balance between short-term lifestyle goals and long-term success.
- Tax-Optimized Withdrawal Strategies: Finding the best order for tapping into various accounts so that your needs and wants are met while also controlling lifetime tax liability.
- Investment Allocations: Market projections, life changes, risk tolerance, and tax liability all factor into making the right portfolio adjustments at the right time.
- Contingency Planning: Creating specialized savings buckets, investment strategies, and legacy plans to cover all your "What Ifs."
3. Adjust 5 Key Levers to Help You Stay Financially Secure
On a recent episode of our podcast, we discussed the process my team uses to assess a retirement plan's probability of success.
It's important to remember that the percentages Keen Wealth uses also take into account a retiree's ability to make adjustments over time, including:
- Discretionary Spending: The single most powerful lever you can pull or ease up on. Setting a comfortable budget and living within your means can help you achieve bigger retirement goals (like travel or relocation) without jeopardizing your long-term plan.
- Reliable Income Streams: Pensions, Social Security benefits, rental income, and working part time can create a stable income floor that we supplement as needed with strategic withdrawals from other accounts.
- Optimized Tax Strategy: Keen Wealth is never only thinking about next April. Moves that could be advantageous for this year's tax liability are always made with an eye towards minimizing your tax liability over the rest of your life.
- Rebalanced Investments: While many seniors shift towards more conservative portfolio allocations in retirement, your nest egg needs to keep generating wealth that will support you for decades to come. Your life needs at every stage of retirement are just as important to your portfolio as what's happening in the markets.
- Withdrawal Strategy: Shorthand internet advice like the 4% rule is static, not dynamic. We customize annual withdrawals to fit each retiree's specific situation and provide peace of mind. Often, that starts with segmenting withdrawals and spending into adjustable "buckets" that cover current, short-term, and long-term spending goals.
Keen Wealth: Your Strategic Partner in Retirement
Running out of money in retirement isn’t inevitable -- it’s usually avoidable when you are engaged with your plan, flexible, and prepared.
But if thinking about your account balances still makes you more nervous than thinking about the Grim Reaper, please come meet with a Keen Wealth advisor. In addition to stress-testing your current plan and checking for issues you may have overlooked, we can be the financial "coach" who puts your money worries in perspective. When you have real confidence in your financial plan, you'll feel better about using your money today and securing your retirement for the future.
About Bill
Bill Keen is a financial advisor with over 30 years of industry experience. As the founder and CEO of Keen Wealth Advisors, a registered investment advisory firm, he focuses on providing personalized retirement planning designed to help people thrive before and during their retirement years. With a passion for educating others, Bill regularly blogs about retirement planning, hosts the podcast Keen on Retirement, and has contributed to Forbes, U.S. News and World Report, Reuters, Wall Street Journal’s Market Watch, Yahoo Finance, and other publications. Based in Overland Park, Kansas, Bill and his team work with clients throughout the greater Kansas City area and across the nation. To learn more, connect with him on LinkedIn or visit www.keenwealthadvisors.com.
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