4 Essential Principles for Safely Spending Your Money in Retirement


When you’ve been working for your entire life, saving for your golden years, it’s so tempting to take full advantage of your savings. There are two groups of retirees – one group spends their savings in a short period of time and ends up being broke while a second group has a strategy that lets them live a carefree life till their last breath.

Here are 4 principles that will help you safely spend your money in retirement:


1. Maximize your Social Security benefits

When it comes to claiming Social Security benefits, no single method or age might be appropriate for you, yet there are a few strategies that help to maximize your Social Security benefits, increasing your income in retirement and lowering the risk of being broke in your golden years. The most popular strategies are:

  • Preserve your Social Security benefits until your FRA or older. Sometimes people sign up for Social Security before they reach FRA. For instance, you might be unable to keep working due to health problems, so you might claim your Social Security benefits at the age of 64. If your FRA is 67, your monthly benefit may be decreased by a whopping 30%.
  • Don’t file for benefits during your highest-income years. If you haven’t reached FRA and your earnings are higher than the yearly limit, your benefits may be decreased.


2. Reduce living expenses

If you’re fully retired, managing your living expenses becomes more important than ever before. Be careful with expensive purchases and trips. See how you can save on your daily expenses.

It doesn’t mean you should be extremely frugal and avoid everything that costs money. Just be smart with your cash and remember you won’t be able to earn it in your 80s in case you run out of all your savings.


3. Supplement your Social Security income

Invest your savings for retirement in low-cost mutual funds suggested by 401(k) plans and IRAs, including target date, stock index or balanced funds. Lots of 401(k) and IRA administrators can help you calculate your Required Minimum Distribution (RMD) and automatically pay it as often as you identify.

The RMD allows minimum annual withdrawal amounts after you reach 70 1/2 years of age. This is 3.65% of savings that boost annually and, at the end of each year, is applied to remaining savings to figure out the withdrawal amounts of the next year.


4. Consider a self-directed IRA

If you want to take full control over your investments, consider a self-directed IRA. There are many great types of IRAs, but this one has no limits and allows you to invest in alternative assets like gold, private market securities, limited partnerships, or real estate.

You’re not limited to mutual funds, bonds, or stocks, but have a unique opportunity to grow your retirement savings in a tax-advantaged account and protect your savings against economic fluctuations.

After a lifelong career, all you may want is relax and enjoy a carefree life. You can avoid stress and worries only if you safely spend your money in retirement.

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