Methods to Avoid Going Broke in Retirement
Retirement can be intimidating. Even with a reasonable amount of savings, you might still worry about running low on funds or, even more concerning, depleting your resources entirely.
In a study published by the Cambridge University Press, 43% of workers across 16 nations identify financial security in retirement as their primary concern.
The good news is that, with proper planning, you can make your retirement years more financially comfortable. This article will explore the ways to help you keep out of financial pitfalls and avoid going broke in retirement.
Ways to Avoid Going Broke in Retirement
Be realistic about your expenses
Many retirees underestimate their spending, which can lead to financial strain. To avoid this, calculate all fixed expenses like housing, utilities, taxes, and insurance, along with variable costs such as dining out, groceries, and travel. Use tools like spreadsheets or budgeting apps to track spending and account for new expenses that may arise in retirement, such as increased travel or healthcare costs. Adjust your lifestyle accordingly to make sure your savings can cover all these expenses.
Create additional sources of income
Diversifying income sources can provide financial stability during retirement. Options include pursuing side hustles, freelancing, or monetising hobbies and skills through platforms like Upwork or Fiverr. You can also consider part-time jobs or passive income sources like rental properties. These additional income streams supplement savings and reduce reliance on government benefits alone.
Downsize your spending
Cutting unnecessary expenses is essential for maintaining financial security in retirement. Downsizing to a smaller home can reduce maintenance costs and free up equity for other needs. Paying off high-interest debt and shopping for affordable insurance plans are other effective strategies. Avoid large purchases that could deplete your savings quickly.
Plan for long-term care
Approximately 70% of people aged 65 and older will need some form of long-term care. Purchasing long-term care insurance early can help cover the costs without depleting your savings. Alternatively, setting aside funds specifically for this purpose ensures you’re prepared for potential healthcare needs.
Final Thoughts
All told, there are numerous strategies available to help you avoid going broke in retirement. When you plan, make sure to take note of all aspects, including your lifestyle choices and the impact of inflation.
Remember, retirement planning doesn’t happen by chance; rather, it demands a proactive approach where we set clear goals, create a comprehensive financial plan, and consistently work towards them.
