| By :
Shane Flait
When you reach retirement, your concern is having sufficient income to last you indefinitely. Typical sources of income are your Social Security, pension, and the income you can withdraw from your invested savings. But if these sources are low in your case, this article shows that budgeting to reduce your retirement living expenses can significantly relieve your reliance on retirement income. If you're within a few years of retirement, your pension and social security income are pretty much determined since they depend on your overall career income path and there's little left of that. Increasing retirement income beyond these contributions will come from your savings if we disregard working in retirement for income. Building up your savings in those working years preceding your retirement is critical to getting the highest possible savings accumulation to help out with retirement income. So you can count on those savings you'll want to invest them in a conservative manner. If you have enough savings to allocate between various asset categories you might chose something like 10% in money markets, 50% in secure bonds or a mutual fund of bonds, and 40% in high quality stocks, some paying solid dividends. Limit your income from savings to 4% of its value: In any case, fluctuations in the markets will occur so that you don't deplete your savings, you might consider restricting your annual withdrawals from your savings. Typically, restricting your withdrawals to 4% per year - despite their higher earnings - should guard you from depleting through good and bad market years. Only as much income is needed as there are living expenses to be paid: But remember, supporting yourself in retirement means that your income covers your living expenses. If you can't develop more savings income, you can alternatively lower your living expenses. Reducing your retirement living expenses can do wonders to bolster the adequacy of a meagre income. You can reduce your living expense in three ways: * Finding a cheaper alternative to supplying the same benefit - like using cheaper brands * Eliminating a clearly unnecessary expense - like debt and smoking * Moving to where the cost of living is lower - moving away from cities or going offshore One way of considering the benefit of these expense reductions is to compare them with the amount of retirement savings that you don't have to accumulate to supply income to pay for those expenses. So reducing your living expense by just $10 per week means you don't need $10 of income from your savings for that week - or $520 for that year. But since you should only withdraw 4% of your savings per year, then you don't need $13,000 of savings since 4% of that would give you that $520 you no longer spend. Its not difficult if you're willing to buy smartly, eliminate what is no good for you, and move to where you get what you want at much less expense to reduce you weekly living expenses by a $300. That's 30 times $10 which eliminates the need of $390,000 (= 30 times $13,000) of savings - or the need for $15,600 (= $300 time 52 weeks) annual income. Well.....you get the idea. Reducing your retirement expenses is a serious way to make a meager income go a long way.
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