Things will get pricier as you age. Inflation will wear away your buying power, putting pressure on your budget. Having a plan for inflation will help you not run out of money in retirement. (Ft Worth Texas CPAs: Make Your Money Last In Retirement, Part 2)
1. Make Healthier Choices
Being sick is miserable and expensive. Many chronic health conditions are preventable. Making healthier choices throughout life can reduce your chances of suffering from diabetes, high blood pressure, arthritis, high cholesterol, and a long list of other ailments.
Spending the money on a healthy lifestyle as well as regular screenings and proper medical care will improve your quality of life and help reduce your overall healthcare costs in retirement. You think that colonoscopy pricing was ridiculous, wait till you have to pay for cancer treatment. You’d probably have to sell a kidney just to pay for parking at Cedars Sinai.
2. Work Just a Little Longer
For you, even waiting just one extra year to retire can greatly increase your standard of living for the rest of your life. Your Social Security alone will be about 8% greater each month for the rest of your life, by waiting just one year to claim benefits.
Your retirement assets will also have one extra year to grow. Since we are talking about ways to make your money last the rest of your life, working longer means your money doesn’t have to work as hard to last for the rest of your life.
3. Face Your Fear of Smart Investing
Savings rates are the banks are in the toilet right now, and have been for over a decade. If you leave money in the bank, you are losing money each and every day to inflation. Fear of investing will almost invariably bring about the result your most worried about: running out of money in retirement.
If you put your money in a CD at the bank, earning 2% per year, you would need around $3,000,000 to produce just $60,000 in retirement income. That is before taxes. Just so you know, bank interest is taxed as regular income, which will likely be less tax-efficient than smart investing.
Don’t even get me started on money sitting in savings accounts paying just 0.01%. It would take 7200 years for your money to double. A million dollars earns just $100 in interest per year at 0.01%. Even the most frugal among us couldn’t live on $100 per year.
4. Plan for Long Term Care
Plan for long term care expenses and then hope you don’t need it. Also, see tip #7 – make healthier choices. Either way, the odds are huge that at least one half of a married couple will need at least long term care in retirement. Often, the man will go in first, which puts a huge strain on the families finances. If not depleting them completely. Then the widow is left living off any guaranteed income they might have, as well as Social Security.
Long term care is expensive. A private room in a nursing home can easily run $110,000 per year or more in Los Angeles. Some parts of the country are cheaper; others are more expensive. Even cheaper locales will break most budgets.
Consider long term care insurance or Life Insurance with a Long Term Care Rider, or you can just save more money for retirement.
Call Scott A. Kunkel, CPA PC today in North Richland Hills at 817-498-1040 to have a chat about ways to save money on your taxes.
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