Retirement planning can often be a harrowing experience. You have to decide which types of accounts you should have, the amount you should save, and when you should retire. What all of this boils down to, at least for the most part, is that your money must be designed to last throughout your retirement.
Let's take a look at a scenario where you have $1.5 million worth of funds. While a million dollars sounds like a lot of money, you must also realize that this money will need to last for a great number of years. If you haven't planned accordingly, you might see yourself shortchanged, which could spell disaster.
To assist you with ensuring that your future goes of without a hitch, we have a few tips you can follow to help you stretch out that $1.5 million over the length of your retirement.
Tip #1: Keep your expenses low and your returns high.
This might sound like an obvious consideration, but many retirees think of their retirement planning in terms of all the minutae of the ordeal. They don't take the time to consider the "big picture," and that could cause problems rather quickly. One of the best ways for your portfolio to remain in shape is to limit the amount of money that is given to the fund company rather than being placed in your own pocket.
Tip #2: Now is the time to lessen your risk.
When you're first starting out, a little risk isn't too dangerous. If fact, if you play the stock market well and/or get lucky, you may see quite a windfall of funds coming your way. Throughout the years, it's likely that you may be balancing those risky financial products with much safer ones, which is a smart thing to do.
Once you're into your retirement, however, you must lessen your amount of risk as much as possible so that your money will last. This means trading in those stocks for safer financial products, such as bonds. Some investors may find the switch a bit tricky, especially if they have a portfolio that is mostly made up of stocks, but a financial adviser can help you sort it all out.
Tip #3: Annuities are a good backbone for your retirement plan.
Annuities are a great way to ensure that the money you've saved for your retirement is able to last. An annuity works rather simply. First, you obtain one through an insurance company. Second, you provide either a lump sum payment, a periodic payment, or both. And finally, whether immediately or at a future date (such as once your retirement begins), you will begin to receive payments. One option you will have with many annuities is to be provided with funds that last for the rest of your life.
But that's not all. Annuities have other benefits as well. One of the most important of these is the option for a death benefit in most cases. No one wants to think about the worst happening, but it's a reality that must be faced head-on. With this benefit, a spouse will begin to receive payments once you've passed. In addition to the death benefit, earnings from annuities are also tax deferred. The only thing to watch out for is to avoid withdrawing funds early, due to penalties involved. Most retirees can avoid this, however, so the likelihood of this becoming a problem is slim.
Source: http://firstsecurityfinancialshow.com/blog/bid/139500/How-To-Make-Your-1-5-Million-Nest-Egg-Last
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