You can ease your mind by acknowledging that retirement does not signal the end of investing. "We tend to think about saving money as something we do only while working, but your money can still work for you in retirement," says Emily Guy Birken, author of Making Social Security Work for You: Advice, Strategies, and Timelines That Can Maximize Your Benefits. If you retire at 62 and live for 30 more years, that's 30 years of growth potential for your investments.
Divide and conquer
To maximize your money, Birken suggests thinking about your retirement portfolio as having three different buckets. Planning this way can help ensure that you'll have what you need for as long as you need it.
- The first bucket is for the first five years of retirement. It is earning interest, but is in a relatively safe investment spot, so you don't have to worry much about stock market fluctuations and volatility.
- The second bucket is for years six through 15 of retirement. It should also be relatively safe and earning interest.
- The third bucket is for a longer time frame — year 16 and beyond — so you can afford to be a bit riskier, since you have more time to let that money grow.
Live now as you plan to later
Another way to ensure that your money lasts throughout retirement is to start living now as if you are already retired. This will help you set a realistic retirement budget and give you ample time to make adjustments to your financial plans before your actual retirement.
Birken advises you to begin by looking at your big line item expenses, such as housing, transportation, and health care. If there are changes you see yourself making in retirement (like downsizing to a townhouse or becoming a one-car household) that you can realistically make early, go ahead and implement them. You'll not only save money that you can funnel into your retirement accounts, you'll ultimately set yourself up for a happier, more satisfying retirement.