3 Ways to Make Your Money Last a Lifetime

By Brett Gottlieb

Retirees and those looking to retire in the next few years all want the comfort that comes with knowing their retirement funds will carry them through their golden years. Nearly one-third of Americans are not confident they will have enough money to retire comfortably,^[1] which means it’s more important than ever to make sure you’re prepared. While there is no quick-fix guarantee that you will never run out of money, there are several steps you can take to maintain your wealth or even improve your financial stability as you near retirement. Instead of worrying about running out of money in retirement, consider these 3 steps to help ensure your money will last a lifetime.

1.   Income Diversification

A great way to make your retirement funds last is to diversify your income. The truth is, no matter what your net worth, your income will always be your greatest wealth-building tool. That’s why a solid income stream is great, but multiple streams of income are even better.

Diversified income streams act in much the same way that diversified investments do. They allow for less demand and stress on any one income source, so that if an unforeseen event were to occur, the remaining income streams can pick up the slack. There are many ways to diversify your income, including: 

• Invest in real estate. Owning rental properties is a great way to earn passive income without dipping into your retirement savings. Real Estate Investment Trusts (REITs) are another popular option.

• Continue to earn active income. You could also pursue a passion, become a freelancer, or work for a nonprofit. You will earn less than what you’re making now, but all these options will provide flexibility and a form of income diversification that will keep your retirement savings intact for longer.

• Use dividend-paying stocks. Often considered an annuity-like cash stream,^[2] dividend-paying stocks give company earnings to investors, typically once a quarter. The top dividend-paying stocks even raise their payouts over time. This not only gives you an income stream, but you can also reinvest the dividends to pursue more growth.

It is helpful to keep in mind asset allocation and diversification may not protect against market risk, loss of principal or volatility of returns. Diversification is a strategy to soften the effects of volatility.

2.   Steer Clear of Overspending & Invest for Growth

Do you know what you will do with your newfound freedom in retirement? Many people start by pursuing all the things they didn’t get to do while working—traveling the world, picking up a new hobby, remodeling their home, and the list goes on.

But many people underestimate the amount of money they’ll spend in those first few years of retirement. With so much extra time on your hands, it’s easy to make a lot of little purchases that add up over time. Avoid overspending by creating a detailed (but realistic) budget for your retirement years. You can budget for extra expenses like vacation or pursuing a new hobby, but make sure you know how it will affect your next egg before you follow through.

In addition to avoiding overspending, another strategy for making your retirement income last is to invest excess cash for growth (stocks) instead of fixed income (bonds). This may sound counterintuitive since retirees tend to invest in more conservative investments to maintain steady income. But as bond yields remain historically low and inflation reaches new highs, many experts have expressed concerns over the sustainability of retirement investments that have a larger allocation toward bonds.

You certainly need the fixed-income component, but it’s important to consider including investments that have a greater growth potential in order to keep up with inflation and maintain your ability to withdraw funds every year.

Make sure you are investing with the proper perspective, and don’t cheat yourself out of years (or even decades) of potential growth.

3. Build a Withdrawal Strategy

When it comes to withdrawing from your retirement accounts, how you take your distributions can make all the difference. Your retirement income sources are likely produced from a variety of assets, including employer-sponsored retirement plans, Social Security, personal IRAs, or other income-generating investments. Each asset has different tax characteristics, and properly structured investments can help lower your tax burden if you plan how and when you’ll withdraw from each.

For example, most people will receive Social Security benefits during retirement, but 85% of your Social Security income can be taxed at your regular tax rate if your income exceeds a certain amount.^[3]

Regarding your personal savings, a $50,000 withdrawal from a Roth IRA will have a wildly different tax impact than that same distribution from a traditional IRA. If you blindly take your money and run, you could trigger an avalanche of higher Social Security taxes, investment surtax, capital gains taxes, and even higher Medicare premiums, which will eat away at the funds that were supposed to carry you through retirement. Creating a withdrawal strategy and a tax plan can help you maximize your retirement funds and improve your financial situation.

Need Help Making Your Money Last?

While there is no one solution when it comes to how much money you will need to live a comfortable life post retirement, there are concrete ways to conduct a financial review and improve your wealth stability. At Comprehensive Advisor, we’re here to help. If you would like to learn more about how to manage your money through retirement, we’d love to hear from you! Email us at info@ComprehensiveAdvisor.com or call (760) 813-2125 to schedule an introductory appointment.

About Our Advisors

Brett Gottlieb is the founder of Comprehensive Advisor and a financial advisor with nearly two decades of industry experience. He graduated from California State University-Chico with two bachelor’s degrees in Business Administration and Economics. Brett is Life Insurance licensed in several states. He is passionate about guiding his clients on retirement income planning, helping each client pursue their specific retirement goals and defending the assets his clients have worked so hard to achieve. Brett is a California native and currently resides in San Elijo Hills with his beautiful wife and three children.

With a combined experience of over three decades in the financial services industry, our advisors hail from some of the largest independent broker/dealers and banking institutions in the country. They have dedicated their professional careers to creating personalized financial solutions for individuals and families who seek successful retirement planning and currently offer investment advisory services through AE Wealth Management, LLC. Our advisors take a common-sense approach to the planning process and work with clients to create a retirement road map to help ensure their assets are protected and they receive the income needed to enjoy their future. Based in Carlsbad, California, they work with clients throughout San Diego County and beyond. Learn more by connecting with Brett on LinkedIn or email them at info@ComprehensiveAdvisor.com.

Investment advisory services offered only by duly registered individuals through AE Wealth Management, LLC (AEWM). AEWM and Comprehensive Advisor are not affiliated companies. C.A. Financial & Insurance Services, CA Ins. Lic. #6000262. This material is intended to provide general information and is believed to be reliable, but accuracy and completeness cannot be guaranteed. Neither the firm nor its representatives may give tax or legal advice. Investing involves risk, including the potential loss of principal. Any references to protection benefits, safety, security, lifetime income, etc. generally refer to fixed insurance products, never securities or investment products. Insurance and annuity product guarantees are backed by the financial strength and claims-paying ability of the issuing insurance company. Our firm is not affiliated with the U.S. government or any governmental agency. 1418004 – 7/22

^[1] https://due.com/blog/retirement-statistics/

^[2] https://www.nerdwallet.com/article/investing/how-to-invest-dividend-stocks

^[3] https://www.ssa.gov/benefits/retirement/planner/taxes.html