4 tips to navigate a 30-year retirement

It's important to not just plan for retirement, but in retirement, too

Americans are living longer, which is a great thing, especially if you have the money to afford a nice, long retirement.

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A new study released by Wells Fargo and the Stanford University Center on Longevity called "Planning for the 30+ Year Retirement," finds that the average age in retirement has gone up from 13 years in 1960 to 18 years in 1990 to 20 years in 2020. As life expectancy is expected to increase and retirement age remains stagnant, as it has been since the 1960s, the researchers expect the average length of retirement to continue to extend over the next 30 years.

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However, planning for a longer retirement is much more complicated these days than in years past. Not only does the nest egg have to account for more years in retirement, but pensions are increasingly becoming a thing of the past and Social Security benefits could be cut by 2035 if new funding sources are not secured. So not only is it important to financially plan for retirement, it is also critical to plan in retirement. Here are four tips to help you better plan while in retirement.

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1. Consider a flexible retirement

A "flexible" retirement refers to one where you work part-time in retirement to bolster your income. This is becoming increasingly popular, and necessary, for many people.

Because people are living longer and are generally healthier, they are more inclined to keep working in some capacity after they officially "retire." A recent survey by Simplywise revealed that 50% of current retirees are currently working and 73% of those who are not yet retired expect to work in retirement.

The Wells Fargo-Stanford paper said the fastest-growing segment in the American labor force is people over the age of 65. Thus, there are a growing number of opportunities for part-time as well as freelance work for this age group, as companies are eager to bring on experienced workers.

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2. Downsize

When you're saving for retirement, the goal, usually with the help of your financial advisor, is often based on some lofty plans like summers in Europe, a trip around the world, and a winter home in Florida.

It is good to think big, because it forces you to save more, but the reality is, life gets in the way and retirees have to adjust their spending. To plan for a long retirement, it is best to lower your overhead to maximize your savings, and that can be done by downsizing. That may involve moving to a smaller house, living in a less expensive part of the country, or opting for that less expensive car. If your house is paid off, you can pocket some of the profit if you sell it and move into a less expensive home. Downsizing on big ticket items can significantly lower your monthly payments.

3. Have a decumulation plan

Just as it is necessary to have a strategy to save and accumulate assets, it is equally important to have a plan on how to "decumulate," or spend your money over the course of retirement.

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Keep in mind that the longer you work, the more you will be able to contribute to and build up your employer-sponsored plan. And if you can hold off on taking Social Security until you reach your full retirement age, which is 67 for most people, you will get your full benefit.

But whatever your situation, plan out when you'll tap into Social Security, when and on what schedule you'll take out money from your savings and retirement accounts, and how much you'll spend each month. If you're working part-time for the first 10 years, that may allow you to hold on to more of your savings longer. The bottom line is, you don't want to spend down your money too quickly, nor do you want to underspend the assets you spend the first half of your life building.

4. Invest in buckets

Thirty years is a long time, so you should still have a long-term investment plan. A good strategy is to place your investments in shorter- and longer-term buckets. A short-term bucket might include cash savings, money markets, and income producing investments that provide you with extra income. But you'll still have an opportunity for a portfolio of longer-term investments if you plan to be retired for 20 or 30 years. As you grow older, you want to reallocate your assets accordingly and you may want to set up a bucket to leave to your heirs.

You could be living in retirement nearly as long as you spent working and building up your nest egg, so that requires an equally robust plan for that long second act.

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