A Simple Solution for Retirees in Bear Markets

The analysis posits that Retiree A withdraws $2,559 from her $500,000 account in her first month of retirement, and that her expenses swell 2.2% annually each year after that. According to SmartAsset’s calculations, this individual’s savings will last some 258 months, or 21.5 years. Thus, if she retires at age 65, she’ll be about 87 before her funds run out.

Retiree B withdraws a lesser amount of $2,309 from her $500,000 account in the first month. Running with the same assumptions, this individual’s savings last 297 months, or 24.75 years. So, if retiring at 65, Retiree B will run out of cash right around age 90.

Finally, Retiree C finds a way to shave $500 from her monthly expenses. Her first withdrawal is $2,059 per year and her annual inflation rate is 2.2%. According to SmartAsset’s calculations, this person’s savings will last 351 months, or 29.25 years, so if she retires at 65, she will be around 94 by the time she exhausts her account.

Where to Cut Costs in Retirement

SmartAsset concludes from these numbers that cutting expenses is a clear way to respond to the current challenges in the market, and the analysis offers some specific suggestions on where such reductions can be achieved.

One key area is in the reduction of housing expenses. Retirees could consider downsizing, taking on short-term renters or moving in with family, the analysis proposes. Retiree couples may also be able to sell a car, as many retirees find they drive less or have more flexibility in terms of required daily commuting.

Other areas of savings are obvious, such as cutting travel and vacations. Retirees can either eliminate travel all together, or they may consider traveling at non-peak times or taking off-beat vacations. As the analysis points out, the reduction of spending can often be achieved by modifying lifestyle expectations rather than completely eliminating them.

According to SmartAsset, some retirees may find they can achieve significant monthly or annual savings by re-shopping for key insurance services, and by ensuring the insurance being purchase is appropriate for their current lifestyle.

The analysis concludes that, if people are looking for ways to finance their desired lifestyle on a fixed income, they could consider hiring a financial advisor. An advisor may be able to help them understand where there is room for cuts in the budget and make grounded calculations about whether they can afford to retire on schedule.