3 things to do right now to avoid running out of money in retirement – Motley Fool

Most are expected to survive their pension savings, a new study from the World Economic Forum found.

It should not come as a surprise when the median amount of babyboomers has saved for retirement is only $ 152,000, according to a report by the Transamerica Center for Retirement Studies. It may sound like a lot of money, but if you withdraw, say $ 30,000 a year, these savings will only last about five years.

So what's the secret not to run out of money in retirement? It can be difficult to calculate how much you need, especially when no one can predict exactly how many years they will spend in retirement. But there are some things you can do right now to make sure you have the best chance of getting your money to stay the rest of your life.

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1. Calculate Your Pension Number

To ensure your savings through retirement, you need to know how much pension will cost. In other words, you need to calculate your pension number.

While it is tempting to just aim for a big goal, like $ 1 million or $ 500,000, your retirement number is very specific to your unique situation. The first step is to create a trained estimate of how much you expect to spend each year in retirement. Most people see their spending down in retirement, but it depends on the lifestyle you expect to live. If you want to travel the world or buy a vacation home in Florida, you need more money than if you expect to spend most of your time at home, relaxing and hanging out with grandchildren.

Use a retirement calculator to get an estimate of what you need to save after retirement, and what you should save each month to reach that goal. Keep in mind that all pension calculators are slightly different and will likely produce different results. To take these differences into account, carefully look at the inputs that each calculator uses. Some will factor in social security benefits and inflation, such as giving you a more accurate estimate.

Once you know what to save each month, create a plan to make sure you stick to your goals. Retirement storage is not something that can be done overnight, and it will take decades of consistent savings to collect thousands of dollars (or more).

Build pension savings in your budget just as if there was another bill to pay. If you are thinking of saving for retirement as something you want to do if you have leftover money at the end of the month, you are more likely to put it off. And if you get used to not storing each month, you probably won't get it.

2. Consider how social benefits will affect your pension

Insurance money can help cover some retirement costs, but they should not account for most of your earnings. The average social security check comes out at around $ 1,400 per month, which is not enough for most people to live comfortably.

Having said that, knowing how much you want to receive in social security, it will affect how much you will have to save on your own. You can check your claims online to get an estimate of what you are expected to receive in the benefits when you demand it, which will help you get a sense of how much you can rely on to cover your retirement costs.

It is important to remember that your benefits are not set in stone. There is a possibility that the benefits will be cut in the next decades, so if you rely on social security to make ends meet in retirement, you may want to have a backup plan in place.

Also the age at which you claim that your benefits will affect how much you receive each month. While you can retrieve them as early as 62 years, it will bring about a 30% reduction in benefits. The only way to receive the full benefit amount you have the theoretical right to claim is at your full retirement age (FRA). Requirements before then and your benefits are reduced. But wait until FRA has claimed (up to 70 years) and you will get a boost in the benefits of up to 32% on top of the full amount.

In theory, your benefits should be about the same over a lifetime regardless of your claim. You either receive multiple checks that are smaller or you receive fewer (but larger) checks. Mathematics does not always work perfectly, though, so you can move forward by claiming earlier or later. If you expect to live a long pension, or if your savings fall short, it may be wise to delay demanding to receive the larger controls. But if you have reason to believe that you don't want to spend decades in retirement, you can submit early to enjoy your benefits while being the best choice.

3. Think about how to cover health costs

Health costs are one of the biggest (but most unpredictable) expenses you will face in retirement. It can make them difficult to plan for, because you can spend a little more than your standard premiums, or you can spend thousands of dollars a year on spending.

Although you cannot predict exactly how much you want to spend on healthcare, you can prepare the best you can for these costs. If you currently have health conditions that will be expensive in retirement, you are beginning to plan these costs now. And if you have any history of certain conditions in your family, you may want to plan for them just in case.

Regardless of your health history, there are certain costs you will be responsible for. When you become 65, you will be eligible for Medicare. With Medicare coverage, you will still be responsible for all your prizes, deductibles and coinsurance, as well as any other out-of-pocket expenses Medicare will not cover. Original Medicare (or Parts A and B) does not cover most routine treatment, such as dental care and eye care, nor does it cover prescription drugs – you need Part D coverage for it. You can choose a Medicare Advantage plan that provides greater coverage, although these plans are often more expensive than Original Medicare.

Long term care is another expense Medicare will not cover. This cost can also be significant, with the average semi-private home in nursing homes costing around $ 6,800 per month according to U.S. Pat. Department of Health and Human Services. Long-term care insurance can help cover some of these costs, but the key is to register early – if you wait until you are in your 60's or later, insurers will either charge you high rates or refuse coverage altogether.

Retirement planning is ultimately a guessing game, as it is not possible to predict exactly how much you have to spend the rest of your life. But by preparing yourself the best you can right now, you have a good chance of living your ideal retirement age.