Ensuring a Secure Retirement: Strategies to Never Run Out of Money

At Seaside Wealth Management, we understand that one of the greatest fears facing retirees is the possibility of outliving their savings. Ensuring that your money lasts throughout your retirement requires careful planning and consideration of numerous factors. Today, we’ll share key strategies to help you achieve financial security and peace of mind in your golden years. From understanding longevity and managing living expenses to making smart investment choices and timing your Social Security benefits, we’ve got you covered!

Longevity: Planning for a Long Life

People are living longer than ever before, and there's a 50% chance that one member of a married couple will live into their mid-nineties. In fact, each year you live, your life expectancy increases. At Seaside Wealth Management, we plan for clients to live up to age 100 to ensure a robust retirement income strategy. While some clients are thrilled at the prospect of a long life, others are more skeptical. Regardless of your outlook, planning conservatively can help ensure you don’t run out of money.

Estimating Living Expenses

One of the crucial steps in retirement planning is estimating your living expenses. Opinions vary on how much of your pre-retirement income you’ll need, with estimates ranging from 80% to over 100%. We often suggest planning for around 100% of your current living expenses, but it’s essential to customize this to your lifestyle. For example, if you plan on an active retirement with frequent travel and leisure activities, you might need a higher budget. And we encourage you to travel, be active and live the life you really want to in retirement.

Mortgage Management

Traditionally, paying off the mortgage before retirement was a common goal. However, with today's low-interest rates, this strategy might not always be the best. Many clients now benefit from keeping their low-rate mortgages and investing extra funds in money market accounts or other investments with higher returns. This financial arbitrage can enhance your overall financial picture without increasing your risk.

Investment Strategies

Your asset allocation is a significant determinant of your portfolio’s success. Historically, a 60/40 split between stocks and bonds was standard, but with changing market conditions, some retirees benefit from a more aggressive stance.

For those comfortable with higher risk, a 100% stock portfolio, buffered by two years of cash reserves, can offer higher returns and help combat inflation.
For most, a balanced approach with a mix of stocks and bonds tailored to your risk tolerance is advisable. We see more people choose to increase their stock allocation to 70% or even 80% to combat the effects of inflation.

Inflation: The Silent Killer

Inflation can erode your purchasing power over time, so it’s vital to factor it into your retirement planning. We recommend using a moderate inflation rate of 3-5% in your calculations. Be mindful that healthcare costs often rise faster than general inflation, so higher rates might be necessary for medical expenses.

Social Security Timing Strategies

Social Security is a critical component of most retirement plans. Deciding when to start taking benefits can significantly impact your financial security.

Delaying benefits until age 70 can increase your monthly payments by up to 8% per year past your full retirement age, providing a substantial boost to your retirement income.
We often advise one spouse to take benefits earlier while the other delays, ensuring the surviving spouse receives the highest possible benefit.

Managing Healthcare Costs

Healthcare costs can be a significant burden in retirement, especially if you retire before becoming eligible for Medicare at age 65.

Private health insurance can cost between $800 to $1,200 per month per person.
Once on Medicare, expect additional expenses for parts B, C, and D, potentially totaling around $400 per month per person.
Be aware that an increase in income can also trigger IRMAA which increases the cost of your Medicare coverage. We try to be tax sensitive with investment decisions to help you avoid or reduce IRMAA whenever possible.

Planning for these costs and their inflationary increases is essential for a secure retirement.

Long-term Care Planning

With 75% of retirees likely needing some form of long-term care, planning for these expenses is crucial.

Long-term care insurance or hybrid policies combining life insurance with long-term care benefits can provide necessary coverage.
Alternatively, setting aside a dedicated investment account for future care costs can help those who prefer to self-insure.

Tax Strategies

Effective tax planning can significantly enhance your retirement income.

Consider strategies like Roth conversions during lower-income years or leveraging qualified charitable distributions to reduce taxable income.
Managing required minimum distributions (RMDs) to minimize tax impact is crucial.

Peace of Mind with Seaside Wealth Management

At Seaside Wealth Management, we pride ourselves on providing comprehensive financial planning that goes beyond numbers. Our clients tell us they value our personalized approach, consistent communication, and commitment to their financial well-being. We focus on helping you achieve your goals, offering peace of mind knowing that your financial future is secure.

At Seaside Wealth Management, we’re more than just financial planners; we’re your partners in life planning. We look forward to seeing you soon!

This commentary reflects the personal opinions, viewpoints and analyses of the Seaside Wealth Management, Inc. employees providing such comments, and should not be regarded as a description of advisory services provided by Seaside Wealth Management, Inc. or performance returns of any Seaside Wealth Management, Inc. client. The views reflected in the commentary are subject to change at any time without notice. Nothing in this commentary constitutes investment advice, performance data or any recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. Seaside Wealth Management, Inc. manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary. Investments in securities involve the risk of loss. Past performance is no guarantee of future results.