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11 Steps to Make $1 Million Last 30 Years in Retirement


Regardless of your age, making sure you have enough money for retirement takes strategic planning. Garnering $1 million in your retirement nest egg might seem like a far-fetched idea but if you start early and manage the money correctly, you might surprise yourself. However, once you leave the workforce, you also have to make sure that money can get you through the rest of your life. Below, we detail some different steps you can take to make sure what you save for retirement lasts. Those looking for even more help planning for retirement can work with a financial advisor

How to Make $1 Million Last 30 Years in Retirement

As your golden years approach, consider this: The average life expectancy in the U.S. increased dramatically from almost 70 in 1960 to just around 77 in 2021. COVID-19 lowered life expectancy by 1.5 years between 2020 and 2021. But nevertheless, a longer life will afford you more time to check off your bucket list. Though living longer also means that you will need to plan for a longer retirement.

The U.S. Centers for Disease Control and Prevention (CDC) says in a recent report that those who live to 65 could expect to live another 18.8 years (almost 84), those living to 75 could reach 87, and those still living at 85 have a life expectancy of 6.7 years (almost 92). So a 25- and 30-year retirement is now quite possible.

For reference, 70% of elderly individuals and 50% of elderly couples rely on Social Security for at least half of their retirement income. This means that you will need to combine your Social Security with additional savings and other income to cover your expenses in retirement.

Even if you manage to save $1 million as a nest egg, you will have to budget smartly. Luckily, there is a lot of things you can do to protect your finances and stretch them through your entire retirement. Start this process by following these 11 steps to ensure your retirement savings last throughout your golden years.

Tip #1 – Start Earning More Interest on Your Savings

Don’t leave money in a checking account because you think interest rates are too low to make a difference. Imagine $16,131 more in your bank account. That’s the interest income you would earn with an additional 0.60% in interest on a $100,000 banking deposit over 25 years. Even if you don’t have that much to put into an account right now, the concept holds true for any amount of savings.

A high-yield savings account can earn you up to 0.60% interest and you can still have unrestricted access to your savings. To put this into perspective, the national average savings account rate is 0.06%, according to the FDIC. By choosing an account that offers the highest rate, you’ll clearly earn a lot more.

Think about it this way: If you have $20,000 sitting in an account earning 0.06% interest, you’d earn about $12 annually. An account with 0.60% interest would earn you $120. That’s without any additional deposits and for just one year. After a few years, these returns can really add up.

What if you’re 50 and want to retire at 65? If you open the same high-yield savings account with the same size deposit and contribute $1,000 a month, you’d end up with $210,154. That equates to more than $10,000 in interest alone. On the contrary, the aforementioned 0.06% APY would garner just $988 in interest.

What Can I Do Now?

Open a high-yield savings account and start putting the amount you can afford into it every single month.

Tip #2 – Plan Your Finances Like a Professional

Dealing with your day-to-day finances is not always a challenge. On the other hand, preparing yourself for retirement is difficult to face alone. If you want to get an accurate picture of your expenses and retirement needs, we recommend speaking with a financial advisor who specializes in retirement planning.

Advisors can help you manage your finances and reach your long-term goals. They also offer advice on how to optimize your retirement account contributions and provide tips for navigating taxes and hidden fees. What’s more, they can also help you feel more confident about your overall retirement plan.

A recent Voya Financial report found that only about 28% of people consult a financial advisor. While using an advisor may cost money, the report found that 79% of people who use one said they “know how to pursue achieving (their) retirement goals.” The study also found that 59% of those who use an advisor have calculated how much they need to retire, while 52% had a formal retirement investment plan in place.

What Can I Do Now?

You can work with a financial advisor to create a plan and make sure you have the right investments. SmartAsset makes it easy to get in touch with one. Our tool matches you with as many as three advisors who can provide expertise based on your specific goals. You don’t have to spend hours interviewing dozens of people and firms. Check out the advisors’ profiles, interview them on the phone or in person and choose which one to work with.

Tip #3 – Have the Right Life Insurance Products

If you still have dependents and haven’t considered life insurance, it’s probably time. Should something happen to you, a life insurance policy helps provide financial protection to those you love. Life insurance helps make sure your loved ones are taken care of after you’re gone. The primary consideration with it, though, is how large a policy you need. Your ideal policy size depends on multiple criteria including how much you make, your assets, any debt you have, your age and more.

You may already have life insurance through an employer, which is great, but your policy probably won’t follow you if you switch jobs or retire. That’s why you may want to consider your own policy, independent of any employer. Also, an employer-provided policy is sometimes only up to double your annual salary. Most financial experts recommend term life insurance coverage that’s equal to five- to 10-times your yearly pay.

What Can I Do Now?

Try finding the right life insurance products for your personal situation. SmartAsset has collected a bunch of life insurance quotes for you to check out.

Tip #4 – Plan for Healthcare Expenses

Unfortunately, most people dramatically underestimate their healthcare expenses and overestimate how much help they will receive from Medicare. In fact, a recent study from Fidelity shows that the average 65-year-old couple in 2021 will need approximately $300,000 saved after taxes to cover healthcare expenses in retirement.

Even with Original Medicare coverage, healthcare costs can quickly become incredibly expensive. In addition to the deductibles, monthly premiums and coinsurance payments that enrollees are responsible for paying each time they access care, most people will also have to pay for additional services and benefits that are simply not covered by Original Medicare. This can include prescription drugs and vision or dental care.

Fortunately, there are other Medicare coverage options that can help enrollees control and even cover a significant portion of these expenses. Because of the potential annual savings in out-of-pocket costs, all Medicare-eligible individuals should consider enrolling in a Medicare Advantage, Medicare Supplement or Medicare Part D plan that meets their needs.

Medicare Part D and Medicare Supplement plans are purchased in addition to Original Medicare, and they can save you thousands of dollars in out-of-pocket costs on an annual basis. Part D plans cover prescription drugs, while Medicare Supplement Plans can cover most, if not all, of your coinsurance and deductibles, as well as provide coverage for additional benefits not included under Medicare Parts A and B.

Medicare Advantage plans, which are sold by private insurance companies as an alternative to Original Medicare, are required to cover the same services as Medicare Parts A and B. They also often include coverage for additional services, like prescription drug coverage, hearing aids and vision or dental care. Most Advantage plans have a $0 deductible, and they are all required to adhere to a set yearly maximum for out-of-pocket costs, which makes it easier to forecast your total health costs for the year.

It is important to remember that not all Medicare Advantage, Supplement, or Part D plans are created equal. Because they are offered by private companies, the additional services and prescriptions covered will vary from plan to plan.

What Can I Do Now?

Try to estimate your medical expenses ahead of time. This will help you in planning out your detailed retirement plans. Lucky for you, we created a guide to health insurance for retirees to get you started.

Tip #5 – Be Sure to Optimize Your 401(k)

11 Steps to Make $1 Million Last 30 Years in Retirement

Millions of people take advantage of employer-sponsored 401(k) retirement savings plans. These are tax-deferred investment accounts that allow you to contribute up to $19,500 per year in 2021 in pre-tax, interest-earning retirement savings. This is the same amount for 2020. As a result, according to Fidelity Investments, 412,000 Fidelity account holders currently have at least $1 million in their 401(k) at the end of the second quarter in 2021.

Typically, an employer will have a set number of funds for employees to invest in, many times matching up to a certain percentage of employees’ salaries. In turn, these accounts provide one of the most efficient ways to save for retirement.

However, many people initially set up a 401(k), choose their contribution percentage and asset allocation and then forget about it. Your account may still be growing as you continue contributing to it, but return rates can change over time, along with your risk tolerance.

For this reason, it’s important to check in periodically on your 401(k) to make sure it’s still aligned with your investment plan and the timeline for retirement. If you find that it’s not, it may be time to make some changes. This could mean changing the ratio of stocks to bonds or investing in higher- or lower-risk funds.

What Can I Do Now?

Try optimizing your 401(k). Going into your account and manually analyzing and rebalancing your investments can be time-intensive and complicated. If done correctly, this hard work can lead to extensive boosts to your returns, though.

Tip #6 – Don’t Overpay on Your Taxes

As you withdraw money from your 401(k) and other retirement accounts, you will need to pay taxes on some or all of that money. You can lower the tax hit by withdrawing money from certain accounts in an informed way. Here are some common retirement tax mistakes:

  • Overpaying taxes on Social Security benefits
  • Paying investment surtaxes
  • Overpaying capital gains taxes
  • Paying higher Medicare premiums
  • Paying penalties on 401(k) or other retirement account distributions

For example, the money you withdraw from a Roth 401(k) account is not taxable income. Conversely, the money you withdraw from a traditional account is taxable. But depending on how much you spend each month and your overall savings, your tax situation could look quite different.

What’s the best way to draw money from your accounts? The answer will vary by person, making this another area where financial advisors can really help out. In the years before retirement, they can explain how to allocate your savings so that you’re set up for retirement. Once you retire, an advisor can show you how to use those savings in a tax-efficient way.

What Can I Do Now?

Use SmartAsset’s free service to find a financial advisor with tax expertise. Even if you ultimately decide not to engage a financial advisor, it’s still useful to speak with one to get a sense of what kind of value they can provide.

Tip #7 – Eliminate High-Interest Credit Card Debt

Making steep monthly payments on high-interest credit card debt can take a toll on what you’re able to save for retirement. Getting rid of this debt could free up money to funnel into your IRA, high-interest savings account or other investments.

One quick way to do this is to take out a personal loan, which probably sounds counter-productive. On the contrary, it’s one of the speediest ways to rid yourself of credit card debt and could potentially save you thousands in interest payments.

Depending on your credit situation, personal loans typically have lower interest rates and monthly payments than credit cards and you can use them to pay off most or all of your debt in one lump sum. That way, your payments are all merged into a single account with your lender.

What Can I Do Now?

You could take out a personal loan with a company like SoFi, which offers loans of up to $100,000 with a fixed-rate APY starting at 4.99% and payment plans of three to seven years.

Tip #8 – Downsize, Even If You’ve Paid Off Your Mortgage

Housing is one of the largest expenses for retirees. Even if you’ve fully paid off a mortgage, you can still have significant housing costs. This could be in the form of property taxes, insurance policies and maintenance. Downsizing is one way to reduce those costs.

Many people buy their homes during the middle of their lives. That could be a time when you have children living with you or when you simply want a larger space where you can enjoy your life. As you get older and your kids move out, a smaller space might be enough for you and your newfound lifestyle. Even better, it could also save you significant money.

What Can I Do Now?

Explore downsizing options and home values in your neighborhood. There are hefty transaction fees in selling your current home and buying another, so we recommend targeting a home that is approximately 40% lower in price than your current home. If you’re unsure of what you can afford, check out SmartAsset’s home buying calculator.

Tip #9 – Refinance Your Mortgage

If you’re still paying off your mortgage, you might want to consider refinancing. This can lower your interest rate and save you money while paying off your mortgage. In the current economy, where interest rates are still quite low, refinancing is a particularly useful tool for homeowners.

Refinancing a mortgage to a longer term can also help you free up money for you to use elsewhere. For example, let’s say you have 10 years remaining to pay off your mortgage and you refinance to a 15-year loan with a lower interest rate. Your new mortgage will be longer, but will also have lower monthly payments. That opens up money every month that you can use to cover other important expenses.

What Can I Do Now?

There are a number of factors to consider when refinancing, so make sure to do your homework. Start by using a simple mortgage refinancing calculator to see if it makes sense to consider refinancing.

Tip #10 – Move to a Low-Tax State

11 Steps to Make $1 Million Last 30 Years in Retirement

One way to lower your tax bill in retirement is to move to an area with lower tax rates. This will not affect federal taxes, but it can greatly lower your state and local costs.

Consider some examples of how moving may benefit you. As an example, New Jersey residents pay, on average, more than $8,400 in property taxes annually. On the other hand, residents of Alabama average $609 per year in property taxes, which is roughly a quarter of the national average of $2,578.

The average state and local sales tax in Louisiana is almost 10%, but four states — Delaware, Montana, New Hampshire and Oregon — have neither state nor local sales taxes.

What Can I Do Now?

Consider which states are the most retirement friendly. Even if you aren’t willing to relocate across the country, moving a few hours away to get over a state border could pay major dividends.

Tip #11 – Maximize Your Social Security Income

Social Security benefits are a major source of income for the average retiree. You can help yourself in retirement by getting yourself the maximum benefit possible. To do this, you’ll need to make some sacrifices by working a bit longer and retiring slightly later. Because the Social Security Administration (SSA) pays your distributions based on your average salary over 35 years, it’s ideal to work at least that long. If you don’t participate in the labor force for that many years, your payments will decrease.

It’s possible to receive Social Security benefits starting at age 62, but that will shrink the size of your benefit by 20% to 30% of its maximum size. You can increase your benefit by working longer and waiting until after 65 to elect your benefits. Each year you work over age 65 (up to 70) can increase your benefit by as much as 8%.

What Can I Do Now?

Waiting to file for Social Security isn’t possible for everyone, but it will help you maximize your retirement income. If your financial situation is relatively conducive to this, the SmartAsset Social Security calculator will provide an accurate estimate of how election age may affect your Social Security income.

Tips for Retirement Planning

  • Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
  • The two most obvious retirement accounts you can use are a 401(k) and an IRA. Check out SmartAsset’s guide to 401(k)s vs. IRAs to learn more.

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