8 Tips To Avoid Going Broke If You’re Already Retired

Like many other retirees, you might be concerned about how you’ll stretch your retirement savings and limited income to cover everyday expenses and live the lifestyle you want. This is especially true as retirement brings financial challenges ranging from market swings and inflation to healthcare expenses and estate planning.

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To avoid going broke, you can follow these eight tips to better manage your money during retirement.

Reconsider Your Spending

An easy way to drain your retirement savings is to not look at your budget and adjust your spending to fit your new financial situation. Making this mistake can also lead to being unable to handle emergency expenses and taking on debt, which will further damage your post-retirement financial stability.

Although expenses such as housing, food and healthcare are necessities, you may still find ways to cut back on them. It’s usually easier to target discretionary expenses — including entertainment, travel, hobbies and memberships — and seek free or cheap alternatives. You should also avoid large purchases that don’t fit your retirement budget.

Don’t Spend Down Your Retirement Money Too Quickly

While you’ll want to consider required minimum distributions to avoid tax penalties, you should avoid withdrawing too much from your retirement savings each year. It’s helpful to aim for a 4% maximum spend-down rate and account for inflation as necessary. Ideally, you’ll try to stretch the savings to cover you for 30 years.

In addition to getting a financial advisor’s guidance, you might try online retirement calculators, such as this one from Vanguard, to see if your retirement savings will last long enough given your usual spending. KeyBank has a more complex calculator that accounts for your planned retirement account withdrawals and further deposits you’ll make.

Have Additional Income Streams

Relying only on your savings and Social Security checks can put you in a tough financial spot, especially in a high-inflation environment. It also leaves less money to enjoy yourself during retirement. Seeking additional income streams will give you more room for covering your needs and wants.

You could find some meaningful part-time work in your community, start a business or get a flexible job online. There are also passive income opportunities, including renting out your possessions, pursuing new investments or earning revenue through online courses and podcasts.

Avoid Falling for Scams

A 2022 report from the FBI Internet Crime Complaint Center found that Americans aged 60 and older lost $3.1 billion to various scams and fraud. To avoid becoming a target and going broke, be aware of common schemes and avoid giving money or personal information to people you don’t know. 

Examples include scammers impersonating legitimate organizations, claiming you won a lottery or requesting a ransom for a kidnapped relative. Other common scams deal with investments, tech support, online romances and insurance. While these scammers often try to get you by phone, email or online, some may even come to your door.

Reconsider Giving To Family

Wanting to financially help out your loved ones is natural, but it can cause financial problems during retirement. Whether it’s paying for your grandkids’ education or giving your adult child a down payment, think carefully about whether you can give away this money and still cover your expenses in the long term.

It may be better to just say “no” or limit your support if you would financially struggle. Your loved ones could then seek alternative options such as loans.

Keep Your Portfolio Diversified

To continue earning a reasonable return on your retirement portfolio yet still manage risk, you must consider your diversification strategy. It’s common to steer away from stocks and make your portfolio heavier in bonds and cash during retirement. While this reduces your volatility risk, it can hurt you financially since stocks tend to have higher average returns.

Instead, you might keep 60% of your portfolio in stocks during your 60s, 40% during your 70s and 20% in your 80s and beyond, suggests Charles Schwab. You can speak with a financial advisor who can consider factors such as your age, income sources, risk tolerance, desired return and inflation to craft the right allocation.

Avoid Underinsuring Your Health

While original Medicare covers many common healthcare needs, it comes with out-of-pocket costs such as coinsurance and copayments. To reduce the financial strain, consider a Medicare supplement insurance plan that helps with out-of-pocket expenses. Note that this option isn’t available if you have a Medicare Advantage plan.

As health issues become more common with age, you may need skilled nursing care at home or in a facility. While Medicare only offers limited coverage, you can seek a long-term care insurance policy. Rather than potentially paying tens of thousands per year on long-term care, you’d typically fully cover costs during a waiting period and then get a per-day benefit amount, up to any lifetime limit.

Rethink Your Tax Strategy

As a retiree, you need to think about the taxes you pay on your various forms of income, properties and everyday purchases. Although you’ll need to consider moving expenses and the cost of living, you could save significant money if you relocate to a retirement-friendly destination with low local and state taxes

For example, Wyoming, Florida and Nevada won’t tax your Social Security or other income, and they have property tax rates below 1%. You wouldn’t have to pay sales or income taxes in New Hampshire, though the property tax rate is a higher 1.96%.

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This article originally appeared on GOBankingRates.com: 8 Tips To Avoid Going Broke If You’re Already Retired

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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