4 Things That You Shouldn’t Do to End-up Spending Your Retirement Savings

April 18, 2013

Debt Management

Retirement Savings

Retirement Savings

The biggest challenge in retirement planning is to ensure that you build a corpus, which will last long enough. You should estimate the number of years you will live and how you will manage your finances after retirement. Here are some tips to ensure that your money will continue to come for as many years as you live.

Social Security

Social Security is the first and important thing, which helps in your savings since these are the payments that will last longer in your life and can match the inflation every year. The person who is eligible for Social Security will never run out of money, but their standard of living may certainly come down radically if all their other income sources go dry, and they try to survive on from Social Security Payments. This is the only guaranteed source of income, which most of the retired people have.

So, it’s highly recommended to increase the amount that you’d get from Social Security. The most important way to boost your Social Security Payments is to ensure that you have at least 35 years of earnings covered, delay in claim up to the age of 70 and claiming spouse payments too.

Pension

Pension is the second guaranteed income after retirement from the job. Many of the private sector companies are insured under PBGC, which gives guaranteed benefits for pension till certain limits annually and the amount will be paid to you even though your employer is not in business. The workers who are having traditional pension plan are offered with lump sum payment amount, but will not have the same protection. If you are not able to manage lump sum amount in a proper manner then you may end up spending the entire money very quickly.

Annuity

Annuities allow you to hand over your retirement savings to an insurance company, and enjoy monthly guaranteed payment for the remaining part of your life. The cost of some of the annuities will be high and the benefits of annuity purchased cannot be passed on to your heirs. But, the guaranteed thing is that you will get some predictable monthly income even if you stay alive after the age of 100 or the stock market crashes, until the insurance companies are in business.

The insurance companies will guarantee you that the money will be paid to you for the rest of your life and it will not matter how long you’re really alive. It you want the guaranteed monthly payment, and then you should not have any access to your money. With many of the annuities, once the money is given to the insurance company you cannot get it back other than the monthly amount. So, invest carefully, and don’t actually give off all your savings.

Partial Withdrawals and Loans

Investors who are fairly disciplined can draw their savings gradually in such a way that it will last for a long period till the time they’re alive. Financial advisors would recommend drawing not more than 3 or 4 percent of the retirement savings, which can be used as a hedge against inflation every year.

And, the worst thing that you’d want to do is to take loan against your pension savings. Never ever take personal loans for planning a vacation, buying jewellery, expensive Smartphone’s, and any of the non-essential stuff.

Loans must be taken only during emergencies, and even if you avail a personal loan, don’t take it against your annuities so long as you can help it. If you have no other way out, then try to repay the loan at the earliest.

If you want your post-retirement life to be peaceful, then you must start saving at an early age.

Author Bio

Von Haefen, a certified financial planner, gives advice to his clients about retirement plans and to save money for retirement at an early age, and use easy personal loans very smartly.

4 Things That You Shouldn’t Do to End-up Spending Your Retirement Savings

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Retirement Savings