What Happens if You Run Out of Money in Retirement and What Should You Do?
07 Mar 2020
You plan for retirement your entire working career.
But what happens if your calculations for your retirement savings goals fall short of what you need?
To run out of money in retirement is a common fear across all generations.
One survey shows that outliving retirement savings is the most common retirement fear for all generations. The results show that 43% of Millennials, 51% of Gen X participants, and 51% of Baby Boomers worry about running out of money.
Taking a proactive approach before you run out of retirement savings can help you avoid financial difficulty. But if you’re already out of retirement savings, you have options.
Keep reading to learn what to do if you run out of money in retirement.
Downsize Your Life
Do you have more home than you need? Downsizing might be a solution to help your retirement money issues.
Even if you own your home outright, you’re paying for it through property taxes, insurance, and upkeep costs. If your home is large or old, you’re likely paying high utility bills.
A smaller home saves on those basic expenses. You can also make a profit, which gives you a lump sum that you can add to your savings account.
You can also downsize in other ways, such as getting rid of extra vehicles and selling items you don’t use. The extra money from selling items gives you a cushion.
Another important step is cutting back your spending. Your retirement income lasts longer when you can pare down your budget.
Use Your Home’s Equity
If you’re 62 or older, you might have the option of a reverse mortgage. You’re borrowing money with your home as collateral.
It’s a little different than a regular mortgage. Each month, interest and fees go onto the loan, but you don’t make a monthly payment. That means your loan balance gets larger each month.
You eventually pay off the loan when you no longer live in the home. That usually means when you sell the home, the loan gets paid off.
A financial advisor can help you decide if a reverse mortgage is right for you. Your advisor can also help you explore investment options and other financial strategies.
Work Part-Time
You’ve already retired, so going back to work might not be in the plans. But if you’re not able to pay your bills, getting a part-time job is one option.
One option is to check with your previous employer to see if they need help part-time. Your knowledge and experience with the company make you an easy hire.
You can also start a side gig that you can do from home. If you retired from an IT company, you might start an IT consulting business to bring in extra cash flow.
The obvious benefit is an immediate source of income to help you cover your bills in retirement. If you find a part-time job with an employer-sponsored retirement program, you can also increase your retirement savings. That can give you more financial security when you retire from your new job.
Seek Out Assistance
Senior assistance programs from the state and federal government offer help with your primary needs.
Some programs provide financial assistance. Others are available to help with medical expenses.
These programs often have financial requirements to qualify.
Make a Plan If You Run Out of Money
Instead of worrying that you’ll run out of money in retirement, take a proactive stance on protecting your assets now. Focus on increasing your retirement savings if you’re still working. If you’re already retired, cut back and make a plan for staying financially stable.
Do you need more assistance with your retirement goals or dealing with a shortage of retirement funds? Contact us today to schedule an appointment with one of our financial advisors.
