Bankrupt: Running Out Of Money During Retirement

America might be the richest country in the world, but that doesn’t mean we have wealth equity. Because if that was the case, half of America’s retirees wouldn’t be fearing bankruptcy right now.

Evidence suggests that 45% of individuals will not be able to meet their financial goals by the time they retire, especially if they follow current spending trends. Which is worrisome because it means most of us can’t even afford to retire even in our 60s, which is the national average retirement age.

So, what’s going on? Why are Americans so at risk even after they’ve worked tireless years to accumulate savings? There isn’t just one answer here, and plenty of factors add up to make up this bleak picture. So, if you’re in trouble of money running out during retirement, here are the dos and don’ts for a secure future. We’re talking:

• Why So Many Americans Are Going Broke
• The Current Inflation Climate And It’s Role In Retirement Issues
• How To Manage Retirement Going Forward

America And Retirement: A Mixed Bag?

Retirement in America feels like a Catch-22. Despite most of us knowing how important it is to save up for the distant (or not-so-distant, for some of us) future, our actions don’t necessarily reflect that.

Turns out, around 69 million workers in the United States don’t have access to a retirement plan, let alone retirement savings. That’s a whopping 56% of the employed workforce. And sure, if you’ve worked in a higher-income job for a while now, you likely don’t have to worry about this.

But the discrepancy is evident in younger workers from low-income households, who don’t believe Social Security will end up benefiting them come retirement.

And that’s a valid concern. Because Social Security funds are shrinking quicker than what is sustainable, and by 2033, we will only have enough funds left to cover 75% of scheduled benefits. More people are retiring than entering the workforce, resulting in a lack of funds for savings.

This mass retirement is dubbed the ‘Silver Tsunami’, with one-third of Americans now 65 years or above. All of these aging adults will require care. Medicare predicts nearly $700 million in expenses, or 3% of the total GDP.

Perhaps that’s why so many in the current workforce are considering delaying retirement altogether.

A late retirement isn’t unheard of; doctors do it all the time. But 63% of the U.S. labor force over 55 years is thinking of doing the same…

How To Not Go Broke During Retirement

Retiring securely is our thing here at Physicians On FIRE. So, we know just how concerns about retirement can snowball and overwhelm you, especially with the current inflation. Things are only getting more expensive, and Social Security might not be enough to get you through retirement anymore, even with savings.

But it can be done right; you just need to set some ground rules and plan things accordingly. Here’s how to not run through your savings in the first few years of retirement:

1. Get A Financial Plan Down Today

This is a basic one, but it’s pretty much what you base your future on. A financial plan for retirement is crucial, because that’s where you’ll get your future expenses in check. A budget planned out with all your assets accounted for will help you get an idea of how much and where you need to put your money.

Don’t be part of the 53% of Americans that aren’t clear on their retirement future. Even if you don’t have access to an employer-provided retirement plan, try talking to a financial advisor and get a budget started.

2. On That Note, Consider Planning Your Taxes

Tax planning might sound complicated but it doesn’t have to be. So many don’t understand that retiring doesn’t mean you enter a lower tax bracket automatically. Honest tax advice can make or break your savings, considering up to 85% of Social Security benefits are tax-deductible. It isn’t just about putting more money in your IRA and hoping for the best.

Effective tax planning can help you make the most of your retirement income, saving thousands of dollars that could instead go towards a comfortable life.

3. Take Care Of Your Health Now, Avoid Regret Later

This might sound like a cliche but taking care of yourself early on does end up saving you from a world of hurt (and health insurance denials) later. Making healthier choices now means you are less likely to need any serious medical attention right as you start retirement. A healthy lifestyle in the present day leads to a secure retirement. It’s expensive to get sick, after all.

Especially now, when we know Medicare is going to be under strain in the upcoming years and you might have to pay for those healthcare costs yourself.

4. Consider A Side Income

I know the current trend is to sell your house and blow all your savings on a new one for a lavish retirement, but let’s think fiscally here. One of the best ways to make sure you don’t go broke during retirement is to, well, keep earning. And by that, I don’t mean continue working in the same job you always have. Just that a second stream of income can ease things.

You can either do a side hustle, many doctors choose telemedicine or even medical witness. Or instead of selling that house, give it up for rent and move into a smaller space. Maximize your savings instead of going through them, that’s what 25% of retired Americans are doing right now.

5. Cut back Where You Need To

Retiring responsibly doesn’t mean not having fun money. It just means you make the choice to scale back on certain luxuries while still keeping essentials in mind. Lavish spending sounds like a good time, but it doesn’t make for a secure long time. It’s why 56% of retirees fear outliving their assets, spending it all on a lifestyle they can’t sustain.

Make a conscious effort to scale back on spending in retirement by cooking more instead of takeout, buying in bulk and creating budgets for gifting and shopping when the grandkids come in.

While the situation seems dire, you don’t have to run out of money in retirement. All it requires is a little patience and planning for your golden hours to be truly comfortable and financially secure.