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Make Your retirement account Last – Three Steps to Insure Retirement Security

The last ten to fifteen years have been financially very good for most of us. With a little effort and a lot of market tailwind, our retirement accounts have grown at an amazing rate. With annual stock returns as high as 20% or more, most of us who have private retirement investment accounts (401K, IRA, etc.) were feeling pretty good. In most areas of the U.S. real estate values spiraled up and up. The combination made many of us who owned homes and stock/bond investments paper millionaires. Then along comes 2008. Our stock investment portfolio values dropped 35-40% and our once fat equity position in real estate rapidly shrunk. Your retirement account doesn’t look so secure anymore.
Here are three suggestions for making your nest egg last as long as you do.
1. Take a Careful Look at Your Present Cash Flows
It’s best to do this on a monthly basis as most expenses and income are easily calculated on that basis. A financial software package is an excellent tool to help you structure this part.
List your monthly cash income in detail by source, i.e. Social Security, pension, rental income, etc. You may already be drawing a fixed amount monthly from your retirement accounts. If you aren’t, here is the place to decide what that amount is going to be and enter it as cash income. A word of caution here: be certain you understand the rules regarding withdrawals from IRA and 401K type retirement accounts. You might want to visit the IRS website for a careful review.There you will find some information on the minimum withdrawal rates required by the IRS. Deciding the maximum, you want to withdraw is up to you. Most experts will recommend that you limit the maximum annual amount to no more than 4% of the remaining balance. That’s a good place to start. Use the larger of the two numbers for now, you can refine it later.
Next list your monthly cash expenses. These should include everything you have to purchase as well as all scheduled payments. This will take some thought; it is easy to forget the small things like an occasional meal or movie, car repairs, etc. Include some “unplanned” expenses like subscription drugs, co-pays and other medical items. At this stage it is probably easier to average some expenses that don’t occur monthly. If you don’t include insurance or taxes in your monthly mortgage expenses, make sure they are included here.

If you have used a financial software package, you can enter the above data into the budgeting portion of the program, and you now have a preliminary view of your monthly cash flows.
2. Develop a Realistic Monthly Cash Flow Budget
If the preliminary budget you came up with in the prior step yielded a positive cash flow, you are starting from a good place. Go over your budget once more, refining the monthly cash outlays. Be more precise in detailing monthly expenses that you averaged in step one. You may want to build in a “set aside” account to accumulate cash to be used for extraordinary items like auto repairs and other fairly large expenditures which do not occur monthly. Emergencies will always occur at the least convenient times, so provide for them in your budgeting process.
3. Take Action Now to Deal with Any Negative Cash Flow
Revisit your monthly budget; looking for spending you can reduce or eliminate. Can you reduce the big cable TV bill by switching to basic service, or drop that membership in the local gym? Maybe shop at discount stores instead of Macy’s, etc As distasteful as it may be, you are going to have to eliminate or reduce some expenditures, including bills that are not going to get paid right away. You will be surprised how flexible lenders can be if they know you are making a good faith effort to pay, so get on the phone and negotiate a payment plan you can live with.
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LEARN MORE ABOUT: IRA Accounts

INVESTING IN A GOLD IRA: Gold IRA Account

INVESTING IN A SILVER IRA: Silver IRA Account

REVEALED: Best Gold Backed IRA

IRA stands for Individual retirement account, a type of savings account that offers tax advantages for people saving for retirement. The two main types of IRAs are traditional and Roth IRAs. In this article, we will focus on the traditional IRA and answer the question, “How long will my traditional IRA last?”

First and foremost, it’s essential to understand how a traditional IRA works. With a traditional IRA, you contribute pre-tax dollars, meaning you can deduct the amount you contribute from your taxable income, reducing your overall tax liability in the year of contribution. The money in your traditional IRA grows tax-deferred until you begin withdrawing it during retirement.

The lifespan of your traditional IRA largely depends on several factors, including your retirement goals, contribution amount, investment returns, and spending habits during retirement.

The amount and consistency of your contributions to your traditional IRA play a crucial role in determining its longevity. The more money you contribute to your IRA along the way, the longer it may last. Additionally, contributing to your IRA regularly can maximize the benefits of compounding, which refers to the potential growth of your money over time. The earlier you start contributing to your IRA and the longer you continue to contribute, the more time your investments have to grow.

Investment returns are another vital factor that can impact how long your traditional IRA will last. The returns on your IRA will depend on the performance of the investments within the account. Stocks, bonds, mutual funds, and other investment options all have different risks and potential returns. Generally, higher-risk investments have the potential for higher returns, but they also come with increased volatility. It’s important to find a balance between risk and reward that aligns with your comfort level and retirement goals.

One popular guideline often used to determine a sustainable withdrawal rate from an IRA is the “4% rule.” According to this rule, if you withdraw 4% of your IRA balance in the first year of retirement and adjust that amount for inflation in the following years, your money has a good chance of lasting for around 30 years. However, it’s crucial to note that this rule is not foolproof and should be treated as a general guideline rather than a strict rule.

Additionally, your spending habits during retirement will significantly impact how long your traditional IRA will last. If you plan to spend conservatively and only withdraw what is necessary for your living expenses, your IRA is more likely to last longer. On the other hand, excessive spending or unforeseen financial emergencies can potentially deplete your IRA faster than anticipated.

To gain a clearer understanding of how long your traditional IRA will last, it may be helpful to consult with a financial advisor or use retirement planning calculators available online. These tools consider various factors such as age, expected retirement date, contributions, investment returns, and desired retirement lifestyle to provide an estimate of how long your traditional IRA may last.

In conclusion, the lifespan of your traditional IRA depends on multiple factors such as your contributions, investment returns, spending habits during retirement, and your overall retirement goals. By contributing consistently, investing wisely, and planning for a sustainable withdrawal rate, you can increase the likelihood of your traditional IRA lasting throughout your retirement years.