It is a common worry among those approaching retirement: Will I have enough money to last me the rest of my life? With longer lifespans and rising healthcare costs, concern about outliving your retirement savings is understandable. However, there are steps you can take to ensure that your money is protected and lasts as long as you require it.
Save for Your Healthcare
One of the biggest concerns for retirees is covering healthcare costs. Unfortunately, Medicare does not cover everything, and health insurance for seniors can be expensive. A recent study found that the average 65-year-old couple will need $315,000 to cover medical expenses in retirement*.
While this may seem like a lot, there are ways to prepare for these costs. First, if your employer offers retiree health benefits, take advantage of them! If not, consider buying long-term care insurance or signing up for a health sharing plan. Both options can help cover the costs of things like nursing homes or home health aides.
Build an Emergency Fund
Another way to prepare for unexpected expenses in retirement is to build up an emergency fund. This fund can act as a cushion in case you need to make any unplanned withdrawals from your retirement accounts or if you experience a drop in your income. Planning ahead allows you to feel safer and face unexpected events easier. Experts recommend saving enough money to cover 3-6 months' worth of living expenses. This fund allows you to reinforce the security of your savings as well as afford emergency needs.
Downsize Your Home
One expense that is often overlooked is the cost of maintaining a home. In retirement, it may not make sense to keep up with a large house and property if you no longer need the space. Paying property taxes in certain states may also cut into your future savings. Downsizing to a smaller home or condominium can free up some extra cash that can be used towards other expenses or invested for your future.
Create a Budget
Budgeting is important at any stage of life, but it becomes even more crucial in retirement when you have limited income and don't have the option of earning more money. By tracking your spending and sticking to a budget, you can make sure that your money lasts during your daily life. Spreadsheets or online tools are useful ways to keep track of your expenses.
There is no need to fear running out of money in retirement if you take the proper precautions. You may even be able to create an estate plan that leaves a legacy for your community & family through trusts or scholarships. By saving for healthcare, building an emergency fund, downsizing your home, and creating a budget, you can ensure that your money lasts as long as you do!
*According to the 2022 Fidelity Retiree Health Care Cost Estimate (CNBC)