The Independent Advisor's
Succession Plan

How to Stretch Your Retirement Income


At advisorRETIRE™, because we help so many financial advisors prepare their business for their retirement through RIA succession planning, we have become intimately familiar with many financial aspects of retirement. Many people save all their lives for retirement, then think that the financial planning aspect is over once they have stopped working. However, life does not stop once you stop getting a steady income, and it is important to keep budgeting throughout retirement. Many people underestimate both how long they will live and how many medical expenses that they will have after retirement. Therefore, if you are near retirement and are concerned that what you have accrued may not be sufficient, here are some ways you can stretch out your nest egg.

Assess Your Precise Needs

Right now, your budget may fit perfectly with your current needs. However, when it comes to budgeting for retirement, your needs will change, and it is important to have a clear picture of what they will look like. People often retire too early because they use their current budget to overestimate how long their nest egg will last them. Calculating a working cash flow analysis can help you figure out your requirements to maintain your standard of living in relation to what your retirement income will be. Delaying your retirement may be frustrating, but it is ultimately the best way to ensure that you will be comfortable for your retirement years.


If, after this analysis, you see that your potential income will not meet your retirement needs, you may consider downsizing your assets. Maybe your home is bigger than you actually need, and you can downsize to a smaller home (and smaller mortgage payments), or you could look into a reverse mortgage. After you retire, it won’t make sense for you and your spouse to both have your own cars. Alternatively, moving to a place with a lower cost of living can help your retirement savings stretch further. You might be hesitant to downsize, but trading in your current lifestyle is worth it to ease the financial stress.

Take a Look at Your Retirement Accounts

It is important to consider your retirement accounts when assessing how prepared you are for your retirement budget. First, understand how taxes affect your retirement savings distribution. If you have a 401k or traditional IRA, for example, income tax comes into play. Alternatively, if you have a Roth IRA, you can withdraw from it without being taxed. You can maximize the effects of your non-taxable accounts by withdrawing from your taxable accounts first. If you still have a few years before retirement and are more than 50, you may consider taking advantage of the catch-up contributions on your 401k, as the contribution limit is raised by 5,500 dollars after 50. You may also consider working part-time during retirement. You can reduce your need to withdraw from your retirement accounts if you have a working income, allowing you to have much greater financial stability once you are in your 80s. Make sure you understand the workings of your taxable retirement accounts, as early withdrawals and some types of rollovers can result in hefty penalties.

Rebalance Your Portfolio

As you reach retirement age, it is time to rebalance your portfolio to meet your needs. When you were younger, you could invest in risky stocks because you had time to recover any potential losses. Now, it is time for lower risk and more conservative investments. You may choose to move your money into bonds, though this safe strategy can result in lower profits than you need for future medical bills. Alternatively, you can move money into annuities or CDs instead, which will provide reliable income. When looking to rebalance your portfolio, think less about individual stocks; instead, focus on your overall allocation of assets. Should you end up taking a loss, try applying it against your taxable savings to lower future taxes on your gains. Increasing risk may be nerve-wracking at this point, but it could be essential for funding the next 20, 25, 30, or more years of your life.

Change Your Lifestyle

You can also stretch out your retirement income by making certain small lifestyle changes that can add up to big savings. First, prioritize your health. It is estimated that retirees will have an average of 220,000 dollars in medical bills. You can cut down your risk of high health costs by caring for your health now. If you eat a balanced diet, don’t smoke or chew tobacco, and exercise regularly, your chances of accruing large medical bills are significantly lower. Additionally, once you are retired, you have way more time to look for opportunities to save. You can start to clip coupons, travel off-season, and research discounts to save money on your expenses. You might also consider trading your car in for a more gas-efficient model to lower your fuel costs. Also, now that you are in the right age range, you can join AARP for discounts on a variety of purchases. Take advantage of your free time to research ways to cut costs and to create a detailed retirement budget.

If you are a financial advisor planning to retire soon, it is imperative that you have a succession plan in place. However, many advisors end up putting this process off, significantly delaying their retirement. You don’t have to procrastinate; you can utilize our skills and experience to put into place a successful succession plan. If you need help with RIA succession planning, contact advisorRETIRE™ here today.

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