Have you heard of the "Spend Safely in Retirement" strategy? It is a research-based approach developed by the Stanford Center on Longevity in collaboration with the Society of Actuaries to give the highest number of retirees the biggest amount of income possible that would last their lifetimes.
According to Stanford researchers:
"The spend safely in retirement strategy is designed to help middle income workers and retirees decide when to retire, how much to spend in retirement, and how to best deploy your financial resources. The main goal of the strategy is to help you turn your assets – Social Security, the ability to work, savings, and home equity – into the most retirement income possible."
These are the five components of the Spend Safely in Retirement strategy:
- Delay Social Security
"Maximizing the value of this benefit means waiting to start until at least your full retirement date. The longer you wait to start Social Security, the greater your monthly benefit will be."
- Plan Your Withdrawals from Savings
"The Stanford researchers recommend that your retirement savings be invested in low-cost mutual funds, target date funds, or index funds. And then, use the required minimum distribution (RMD) formula to determine your annual withdrawals from these savings."
- Get Detailed with Projected Expenses
"You need to see if the income from the above sources – as well as a pension if you are lucky enough to have one – is adequate to cover all of your projected expenses. The more accurate you can be with projecting your expenses, the more reliable your plan will be."
- Explore Other Sources of Income to Fill Shortfalls
"The spend safely in retirement strategy recommends you consider delaying retirement, reducing expenses, getting a retirement job, and/or tapping your home equity to fill in the gaps."
- Explore More Sophisticated Withdrawal Strategies if You Have a Lot of Savings
You could consider "annuities, a bucket approach, varying your withdrawal amounts based on investment returns (applying floors and guardrails), setting up a bond ladder, or establishing a more sophisticated allocation for your assets."
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