Afraid of outliving your assets?

Carman F. Young Wealth Planning

Departure from the work force is a time to anticipate, but often, fears about money can dampen the joy of retirement. The fear of outliving one’s assets is common among those who are preparing for and entering retirement. Increased life span, inflation, stock market volatility, and the possible need for assisted living can all create financial strain. It is imperative to have an understanding of what your expenses will be in retirement in order to create a plan to cover these costs. The good news is that with proper planning and knowledge of what your finances may look like, you can prepare for retirement and reduce your anxiety.

One of the first expenses to consider is the possibility of any lifestyle change, including home renovations and travel plans. It is important to plan for these because there will always be unexpected or non-routine costs such as replacing the roof, purchasing a new air conditioning unit or buying a car. If travel is in your plans, be sure to budget for it. Remember, since life spans are increasing, you may want to project all expenses to age 100, especially if there is a history of longevity in your family.

An expense to avoid is the carry-over of debt. Pay off your mortgage and credit cards now so you will not have interest and principal payments that can drain the money you had earmarked for retirement. If you feel you cannot pay off your existing home’s mortgage prior to leaving the workforce, it may be wise to consider downsizing to a less expensive living situation.

As you near the age of retirement, delaying withdrawals from your portfolio becomes more important than extra savings. For example, by simply earning 7% annual returns on your investments with no withdrawals from your retirement accounts you can almost double the size of your retirement assets in ten years.

Delaying retirement is another important way to protect your investment portfolio’s longevity. If you don’t want to keep your current job for ten more years, consider a career change, part-time work, or even start your own business! One more way to reduce investment portfolio withdrawals in retirement is to postpone Social Security.

This article originally appeared in the February, 2011 issue of Columbia Sun News.

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