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Practical Ways to Avoid Running Out Of Money in Retirement

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Practical Ways to Avoid Running Out Of Money in Retirement

Retirement is on everyone’s mind. If you are not thinking about putting money in retirement, then you should. Maybe, you think you won’t need it because you can count on Social Security. Unfortunately, many retired people, who depend totally on Social Security, are struggling and barely getting by–and the government wants to cut their benefits further.

You may think you are too young to consider retirement. Even if you are young, there are many things that could happen to you before retirement that will affect your future. You may get injured and never work again, or you may have a family and not put money away.

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How can you ensure you have enough money when you retire? Let’s take a look at a few practical ways you can avoid running out of money for retirement.

Invest

Some people think that putting money away in an investment account is enough to make sure they have money for when they retire. Putting away money today will not guarantee that it will be enough to sustain you in 30 or 40 years. When planning for retirement, you must factor in inflation, or the fact that the cost of goods increases over time. Inflation can be pegged at about 4% to 5% per year. That means if you put away money in a savings account which earns 1% per year, you will not make enough money to cover inflation. Even if you saved $1 million, in 30 years, it may only be worth a fraction of that.

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Factoring for inflation, it is crucial that you invest for your retirement. If you invest in something that can yield you more than 4% or 5% a year, then you are ahead of the game. You do not need to earn that much per year, but you do need to average it over the lifetime of the investment. If you earn 10% one year and maybe 5% the next, then you can still be ahead.

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Practical Ways to Avoid Running Out Of Money in Retirement

     

    Alternate Investments

    One way to invest is through the stock market. Be advised: this is somewhat risky. You may want to look at alternatives.

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    One such alternative is in structured settlements. If you have a large amount of cash, you can pay cash for structured settlement payments. Some people get structured settlements from their insurance company or from court cases. However, many people prefer the lump sum award. This is where you come in. You can invest in such instruments and offer cash for their settlement payments. You give the settlement owner the cash they need (minus a percentage) and take over payments for them. This way, they get cash and you get a return for your investments. Paying for structured settlement payments is a great way to invest your money, and ensure you do not run out of money for retirement.

    Start Young

    When you are young, you have the greatest asset when it comes to investing–time. When you have a lot of time before retirement, you can ride the ups and downs of the market. It’s crucial to start young and invest as much as you can.

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    Live Below Your Means

    Perhaps the most practical advice of all is to live below your means. When a person’s salary rises, his lifestyle often rises along with it, which inevitably requires more money. Living below your means now ensure that you will not run out of money during your retirement. One of the keys to saving a lot of money is to not increase your spending, even if you get bonuses or raises every year. If you are spending too much money, you will not be able to save for your future.

    In Summary

    There are many ways to invest in your retirement. By working now, you can relax in the future.

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    Last Updated on January 5, 2022

    33 Painless Ways to Save Money Now

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    33 Painless Ways to Save Money Now

    In a difficult economy, most of us are looking for ways to put more money in our pockets, but we don’t want to feel like misers. We don’t want to drastically alter our lifestyles either. We want it fast and we want it easy. Small savings can add up and big savings can feel like winning the lottery, just without all of the taxes.

    Some easy ways to save money:

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    1. Online rebate sites. Many online sites offer cash back rebates and online coupons as well. MrRebates and Ebates are two I like, but there are many others.
    2. Sign up for customer rewards. Many of your favorite stores offer customer rewards on products you already buy. Take advantage.
    3. Switch to compact fluorescent bulbs. The extra cost up front is worth the energy savings later on.
    4. Turn off power strips and electronic devices when not in use.
    5. Buy a programmable thermostat. Set it to lower the heat or raise the AC when you’re not home.
    6. Make coffee at home. Those lattes and caramel macchiatos add up to quite a bit of dough over the year.
    7. Switch banks. Shop around for better interest rates, lower fees and better customer perks. Don’t forget to look for free online banking and ease of depositing and withdrawing money.
    8. Clip coupons: Saving a couple dollars here and there can start to add up. As long as you’re going to buy the products anyway, why not save money?
    9. Pack your lunch. Bring your lunch to work with you a few days a week, rather than buy it.
    10. Eat at home. We’re busier than ever, but cooking meals at home is healthier and much cheaper than take-out or going out. Plus, with all of the freezer and pre-made options, it’s almost as fast as drive-thru.
    11. Have leftovers night. Save your leftovers from a few meals and have a “leftover dinner.” It’s a free meal!
    12. Buy store brands: Many generic or store brands are actually just as good as name brands and considerably cheaper.
    13. Ditch bottled water. Drink tap water if it’s good quality, buy a filter if it’s not. Get 
        a reusable water bottle and refill it.
      • Avoid vending machines: The items are usually over-priced.
      • Take in a matinee. Afternoon movie showings are cheaper than evening times.
      • Re-examine your cable bill. Cancel extra cable or satellite channels you don’t watch. Watch the “on demand” movie purchases too.
      • Use online bill pay. Most banks offer free online bill paying. Save on stamps and checks, and avoid late fees by automating bill payment.
      • Buy frequently used items in bulk. You get a lower per item price and eliminate extra trips to the store later on.
      • Fully utilize the library. Borrowing books is much cheaper than buying them, but in addition to books, most local libraries now lend movies and games.
      • Cancel magazine/newspaper subscriptions: Re-evaluate your subscriptions. Cancel those you don’t read and consider reading some of the other publications online.
      • Get rid of your land-line. Do you really need a land-line anymore if everyone in the family has a cell phone? Alternatively, look into using VOIP or getting a cheaper plan.
      • Better fuel efficiency. Check the air pressure in your tires, keep up with proper auto maintenance, and slow down. Driving even 5MPH slower will result in better fuel mileage.
      • Increase your deductibles. Increasing the insurance deductibles on your homeowners and auto insurance policies lowers premiums significantly. Just make sure you choose a deductible that you can afford should an emergency happen.
      • Choose lunch over dinner. If you do want to dine out occasionally, go at lunchtime rather than dinnertime. Lunch prices are usually cheaper.
      • Buy used:  Whether it’s something small like a vintage dress or a video game or something big like a car or furniture, consider buying it used. You can often get “nearly new” for a fraction of the cost.
      • Stick to the list. Make a list before you go shopping and don’t buy anything that’s not on the list unless it’s a once in a lifetime, killer deal.
      • Tame the impulse. Use a self-enforced waiting period whenever you’re tempted to make an unplanned purchase. Wait for a week and see if you still want the item.
      • Don’t be afraid to ask. Ask to have fees waived, ask for a discount, ask for a lower interest rate on your credit card.
      • Repair rather than replace. You can find directions on how to fix almost anything on the internet. Do your homework, and then bring out your inner handyman.
      • Trade with your neighbors. Borrow tools or equipment that you use infrequently and swap things like babysitting with your neighbors.
      • Swap online. Use sites like PaperBack Swap to trade books, music, and movies with others online. Also, look for local community sites like Freecycle where people give away items they no longer need.
      • Cut back on the meat. Try eating a one or two meatless meals every week or cut back on the meat portions. Meat is usually the most expensive part of the meal.
      • Comparison shop: Get in the habit of checking prices before you buy. See if you can get a better price at another store or look online.

      Remember that saving money is not about being cheap or stingy; it’s about putting money into your bank account rather than giving it to someone else. There are many ways to save money, some you’ve never thought of, and some that won’t appeal or apply to you. Just pick a few of the ideas that sound doable and watch the savings add up. Save big, save small, but save wherever you can.

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      Featured photo credit: Damir Spanic via unsplash.com

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