3 Strategies To Make Sure You Retire with Confidence

Are you feeling confident about a plan for your retirement? A recent survey by AARP found that many Americans over 50 just aren’t feeling confident about their finances — and one in five report having no retirement savings at all. Additionally, more than half said they just don’t think they’ll have enough money to last as long as they do. 

It may be scary, but it’s our reality: Many of us used to have pension plans to keep us afloat in retirement, but now the vast majority of us rely on Social Security (which could be depleted by the mid-2030s) and our 401(k)s. And unfortunately, not all of us who have a 401(k) are even using it — just 50% of people who have access to a 401(k) actually take advantage of it. At the same time, we’re also living longer. According to the WHO, life expectancy increased by more than 6 years between 2000 and 2019 – up to 73 from 67. So, when we think about how to plan for retirement, we have to acknowledge that our system and our life expectancy are just different now — which means we need to plan differently. 

And yes, that means we need to actually make a plan. Once we start retirement planning, our golden years can become a positive and exciting phase to look forward to, rather than something to dread.

How do we do it? In her book, How To Retire: 20 Lessons For A Happy, Successful, And Wealthy Retirement, Christine Benz asked 20 retirement thought leaders (including HerMoney CEO Jean Chatzy!) to take a deep dive into a single lesson that they believe contributes to success in retirement. Here are her top 3 tips on how to plan for the retirement of your dreams. 

How to Plan For Retirement Tip #1: Break Out The Buckets

Ever heard of the “bucket strategy” or “bucket approach”? Essentially, it involves keeping a portion of your assets in cash to give yourself peace of mind when there’s a downturn in the market. Of course, you still have your investment portfolio, but you don’t have everything in your portfolio: You make sure you have a bucket of cash on hand that’s sufficient to weather any market downturns, so you don’t have to take a loss by cashing in your investments at a bad time. 

Just how much cash should we have on hand? If you’re spending at a normal rate of 4 percent a year, Benz recommends keeping 8 percent (or roughly 2 years) of living expenses set aside in your “cash bucket.” Just make sure to put the money in a HYSA or other account where it’s accessible, but also earning as much interest as possible as an inflation hedge. 

How to Plan For Retirement Tip #2: Consider Semi-Retirement

According to data from the Bureau of Labor Statistics, the number of people 75 and older who are still working is expected to grow by 96% by 2030. “You’ve got a lot of people hurtling toward retirement without adequate savings,” Benz says. “So for some people, it’s a way to save longer, and to have additional years of compounding, to forestall actually spending from whatever investment assets that they’ve managed to save.”

There are also some important non-financial reasons to consider semi-retirement. “Especially for people who have jobs that have been intellectually stimulating, they’re looking at them and saying, well, there’s something that I get from this that gives me a sense of purpose, and it’s not just money,” Benz says. 

If you’re considering semi-retirement, consider picking up a job that’s less stressful than your previous day job, but that gives you a reason to get up, get out of the house, and interact with colleagues and your community. 

How to Plan For Retirement Tip #3: Do The Math

One of the reasons that we know people experience a shortfall in retirement is because they never run the numbers to figure out exactly what they’re going to need. Benz recommends setting aside time to map out your monthly retirement needs, even if they are very loose calculations. Start by going to the Social Security Administration website, and get an estimate of what your benefits will be. 

Then, couple that number with what you’ll be able to withdraw from your savings and investments, keeping the 4 percent rule in mind. 

“Say I’ve got a million dollars. I’m taking 4 percent of that in year one of my retirement. That means I could take 40,000,” Benz says. “So I’ve got my expected annual benefit from Social Security, and I’ve got my safe starting portfolio amount. Look at those two together and check if those come close to supplying the income that you’ll need.”

The Bottom Line 

No matter when you plan to retire, one thing is certain — only when you take control of your money can you truly set yourself up for success. No one wants to leave their future to chance. By being proactive and tactical about how you plan for retirement, you’ll not only build confidence, you’ll build a retirement that’s truly your own.

MORE ON HERMONEY:

• How To Navigate Retirement While Paying For College
• Are Annuities A Good Investment? What They Are And Why Women Should Consider Them.
• HerMoney Podcast Episode 414: Retire On Your Own Terms

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