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You've worked hard your whole life to be able to enjoy retirement. Once you enter that phase, the goal is to make sure your money lasts as long as you do. To that end, here are some things you can do to drastically increase the odds that you won't run out of money.
1. Set a realistic spend-down rate.
How much of your portfolio funds can you safely spend each year? By my calculations, I think withdrawing 3.5 percent of your balanced portfolio in the first year and increasing that amount each year by the rate of inflation are relatively safe actions if you're around 65 years old. This means that if you had $100,000 in investments and home equity, you could spend $3,500 the first year. With 2 percent inflation, you could increase it by $70 the next year, and so on. (Don't forget you'll be getting Social Security, too.)
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2. Have a backup plan.
Investing is uncertain, and things may not go as planned. Look at your expenses and decide what's nondiscretionary (property taxes, utilities, food) and what's discretionary (travel, entertainment). Then examine those discretionary items and decide how much you could reduce them should markets plunge and not quickly recover.
3. Inventory what makes you happy.
Analyze your nondiscretionary expenses and recall which ones brought you bliss. Typically, the new car doesn't bring as much long-term happiness as taking the grandkids out for a meal or on a vacation. Financial journalist Jonathan Clements notes that research shows that experiences typically bring more joy than stuff does.
4. Take a part-time job doing something you love.
I'm a believer in phased retirement. From an emotional standpoint, it's hard to go from decades of working full time to having no routine at all. But from a financial standpoint, working part time accomplishes two financial goals. It brings in cash and gives you less time to spend money, as well. Don't take a stressful job, but consider earning a bit doing something you love. “Life in retirement is much more than a 25- to 30-year vacation,” says Steve Vernon, author of Don't Go Broke in Retirement. "Finding work that you enjoy is a great way to put extra money in your pocket, have a reason for getting up in the morning and to be out in the world."