3 Ways to Make Your Money Last a Lifetime

By Antonio Porretta

Will your retirement money last as long as you do? Of course that’s the goal, but how do you get there? If you’re nearing retirement or just starting to think about what you might want it to look like, this is one of the most important questions to ask. No one wants to worry about running out of money during their retirement years, but for 56% of Americans, this is a major concern. (1) Having enough money to fund your retirement is not going to happen automatically—you must take intentional steps to make sure you (and your retirement accounts) are prepared for your golden years. 

So, the next question: What can you do to ensure your retirement dreams are fully funded? While there is no guarantee you will never run out of money, there are certain steps you can take to maintain your wealth and improve your financial security. Instead of worrying and wondering if you will have enough for retirement, follow these 3 steps to help make your money last a lifetime.

1. Create Multiple Income Streams

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 keeps 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. 

2. Avoid 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 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 a vacation or pursuing a new hobby, but make sure you know how it will affect your nest 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 a 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 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. Create 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?

Preparing for retirement is not a one-and-done event; it’s a process that requires careful consideration. While there may not be a one-size-fits-all approach to retirement planning, there are concrete steps you can take to maximize your retirement accounts so you can get the most out of your assets. At Blackbridge Financial, we’re here to help you develop a holistic plan designed to connect you with your future.

If you’d like to learn more about how to manage your money through retirement, we’d love to hear from you! Email me at [email protected] or call 704.960.9646.

About Antonio

Antonio Porretta is an independent wealth manager at Blackbridge Financial with over 20 years of experience. He specializes in helping people create, distribute, and preserve their wealth. Antonio received an executive MBA from Saunders College of Business at Rochester Institute of Technology in 2007 and also holds the Accredited Asset Management Specialist℠, AAMS® designation. Originally from Rochester, NY, Antonio has been a resident of Harrisburg, NC, since 2007. Outside of work, he enjoys playing soccer and tennis, coaching, and spending time with his wife, Laura, and their children, Cristiano, Victoria, and Matteo. To learn more about Antonio and how he can make a difference in your financial life, visit www.blackbridgefinancial.com.

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(1) https://www.nirsonline.org/wp-content/uploads/2021/02/FINAL-Retirement-Insecurity-2021-.pdf

(2) https://www.nerdwallet.com/article/investing/how-to-invest-dividend-stocks

(3) https://www.ssa.gov/benefits/retirement/planner/taxes.html