No one wants to think about how they’d handle a personal finance crisis after retirement, yet that was a reality for the 20 percent of seniors who outspent their retirement income in 2009, sometimes by as much as 175 percent. You don’t have to be a statistic. There are things you can do to stretch your savings while still maintaining a comfortable lifestyle.

1. Move to a cheaper city, town or state.

Cost of living varies greatly across the cities and small towns of the U.S. Depending on where you live now, you might be able to shave off as much as 50 percent of your living expenses, just by moving to the right area. Strategic relocation isn’t always about finding the cheapest area, however. It may be more about finding an area that has cheap services you can take advantage of. For example, an expensive city with a very inexpensive public transportation system and aggressive senior housing programs might actually be a cheaper place to live than a small town with low grocery prices, but no public transportation or senior housing options.

2. Focus on fulfilling basic needs.

Happiness and consumerism are connected—but exactly how connected are they? J.D. Power and Associates gathered customer satisfaction levels for vehicle purchases and found that customers who’d bought a really expensive car had higher levels of satisfaction than those who hadn’t, but the increase in satisfaction was only slight—not nearly enough to justify the additional funds they’d spent.

The takeaway here is that buying a basic model of car, appliance, or other big-ticket item, will fulfill your genuine utility needs and keep you satisfied. You aren’t really missing out on a lot by not spending more.

3. Maintain and follow a budget.

You might not be saving for retirement anymore, but that doesn’t mean you can get away with skipping the budget. Once you reach retirement, a budget is a vital tool that ensures you keep your spending at a level your savings can sustain for decades. The budget is your system of checks and balances that safeguards you against overspending.

4. Consider potential taxes.

Taking taxable distributions from your retirement accounts, selling assets in non-qualified accounts, and even getting a part-time job can all trigger tax payments. While that’s not necessarily a bad thing, it’s something you should look at in advance, so you can make informed decisions about how to use your money. You might even find that you can avoid some of the taxes by making different decisions—such as pulling distributions from a Roth or taking on fewer hours at a part-time job.

5. Limit your liquidations.

When it’s time to take income from your retirement account, you may need to liquidate some of your holdings in order to make the distribution. Liquidate too much and you’ll be left with cash sitting in the account, earning very little interest. If you reinvest, you may have to buy back into the liquidated position at a higher price, paying commissions again and essentially losing money. While strategic liquidations to realize gains make sense, liquidations just to free up cash that sits in the account might not be such a good idea. Make sure that you always have a plan for the money you liquidate, before you liquidate it.

6. Consider an annuity.

An indexed annuity with a guaranteed income rider is a great way to help supplement your retirement savings. Even better, this type of annuity acts as a hedge against market downturns by locking in your gains and keeping your values from falling. When the market’s going up, your annuity can, too. The guaranteed income rider takes away much of the unpredictability of retirement income and lasts for life. If you add additional riders, such as the long-term care rider and the inflation rider, you can maximize the annuity’s usefulness in your retirement portfolio. Since these contracts are also regulated by state insurance departments and are subject to risk-based capital requirements, they offer a lot more security than other products you might invest in.

Fear of the unknown future of your finances is natural. The way to get over that fear is not to ignore it or to laugh at it, but to have a solid plan for controlling your expenses and spending. Be sure to contact your financial advisor to help you with your retirement planning. The more proactive you are about taking control and actively managing your money, the less at-risk you’ll be.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investments or products may be appropriate for you, consult with your financial advisor.

The Retirement Pros
January 2015