How to Sleep Better at Night in Retirement

Retirees have many financial worries. Here’s how to ease your mind.

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Retirees have plenty of money worries that could be keeping them awake at night. Some people wonder whether their fixed income will keep up with rising costs, while others are concerned that they will spend down their savings too quickly. Here are some financial strategies that could help you sleep a little better at night.

[See 10 Essential Sources of Retirement Income.]

Buy a broad market index fund. There are many good reasons to buy an index fund that tracks the S&P 500, but one of the best reasons is because investing in an index fund represents a relatively care free way of owning stocks for the long term. Unlike individual stocks, buying a broad market index fund is a way to bet that the economy will grow over the long term, a much safer bet.

Cut your expenses. The less you need to spend on a monthly basis, the less you need to save for retirement. Our society is used to thinking that making another purchase will improve our quality of life, but this is not necessarily true. Frugal living doesn’t have to be a sacrifice. Cutting back on your expenses means you will be better able to save and that your savings will last longer in retirement.

Have a plan. Accumulating a significant nest egg is only the first step toward a secure retirement. You need to develop a strategy for spending your savings that allows you to meet all your expenses without running out of money too soon. Sit down and come up with a retirement budget and seek professional advice if you need it.

[See 6 Reasons to Tone Down Your Inflation Worries.]

Buy individual bonds. When selecting a bond fund you have to pick the right fund manager as well as figure out the performance of bond prices during the time that you own the investments. But you can eliminate some of the uncertainty by buying individual bonds instead. With individual bonds, you know the terms ahead of time, such as the maturity date, frequency of coupon payments, and the yield you will get. And by diversifying your bond holdings you can minimize the impact of a potential default.

Diversify. Don't limit your diversification efforts to your investments. Having diversified streams of income, multiple ways to access short-term money, and a vast array of skills at your disposal can all help you weather any sudden expense in your retirement years.

Consider an annuity. Getting a guaranteed monthly check for the rest of your life is a great way to increase your retirement security. Sometimes these insurance products can be expensive. But there's a certain level of comfort in knowing that you will always get a steady stream of payments no matter how long you live.

[See 8 Last-Minute Ways to Stretch Your Nest Egg.]

Write a will. Make sure your left over retirement savings is distributed to who you want it to go to. With a will and the help of an estate planner, there will be no ambiguities for you and your heirs, which will help reduce family conflicts now and in the future.

Keep an emergency fund. Having an account where you keep enough money for a few months of your expenses isn't only for those who have a job where they could be laid off. When you have a sizable chunk of money set aside for short-term expenses, you can avoid withdraws from your nest egg at inopportune times.

David Ning runs MoneyNing, a personal finance site aimed at helping others change their habits for a better financial future. He suggests that everyone to sign up for an online savings account to get more out of our hard earned money.