How to Stretch Your Retirement Savings

These strategies will help your nest egg to last longer.


Most of us want to retire at some point, but we are scared of outliving our retirement savings. Luckily, we are generally very adaptable and can take steps to reduce our spending. If you find your nest egg diminishing at a more rapid pace than you would like, here are seven adjustments that will stretch your savings much farther.

[See How to Save for Retirement on a Low Income.]

Skip inflation increases. The 4 percent withdrawal rule already takes into account that your withdrawals will increase each year to cope with inflation. But you can certainly give your retirement portfolio more time to recover if you forgo your inflation increase whenever the markets take a dive.

Only withdraw from stable investments. A big withdrawal at a time when your portfolio value is down could deplete your savings so drastically that it doesn't have a chance to recover. Therefore, safe withdrawal rates are usually much lower when your portfolio's volatility is high.

One way to cope with this is to set up two buckets of funds, where you only withdraw from the bucket that has lower volatility, such as a mix of bonds and cash. Doing so won't increase your long term potential returns, but being able to avoid worst case scenarios will dramatically increase the chances that your retirement portfolio will last.

[See 5 Ways to Make Your 401(k) Balance Last Longer.]

Cut your spending. You could lower your withdrawal rate when your retirement savings takes a hit. One way to do this is to take out 4 percent of the new total and work out a way to live off the new amount. Another way is to look at your expenses and either eliminate or adjust how you spend on your luxury items. For example, instead of traveling overseas this year, you can always turn that into a domestic trip. Or if you go to the spa once a week, try reducing the frequency of your visits. There are lots of ways to live more frugally, both before and after retirement. Take a good look and you will find lots of potential ways to cut your budget.

Delay Social Security. At some point you must determine when to start collecting Social Security in order to maximize your benefit. But to know that, you will have to figure out how long you will live— an impossible task. One major advantage of delaying Social Security is that your monthly benefits will increase. While doing so means you have to wait a few years to collect, a bigger monthly check will help pay for more of your monthly expenses when you do collect.

[See 5 Ways to Finance Retirement Until Age 100.]

Be close to your family. Don't move near relatives just because you believe they will take care of you if you run out of money. Rather, be close to your family because they will give you joy that no amount of spending can replicate. Sure, there are more excuses to spend money for your loved ones when they are close, but you can also choose to spend more time with them instead of spending money on them. If you can learn to appreciate the people around you instead of trying to spend your way to happiness, then your expenses will magically drop.

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.