1 Easy Ways to Increase Your Money in Retirement

Retirement can be nerve-wracking. No matter how much you save and plan, there’s no guarantee you’ll have enough money to get you through the next few years or decades.

Want to make sure your retirement savings will last? Try this simple strategy.

This 1 Tip Can Help You Sustain Your Retirement Savings

There is a common belief that retirement investing should be different from pre-retirement investing. Portfolios tend to become more conservative, often swapping stocks for bonds. This is still a smart move for many people, especially if they can’t afford short-term volatility and don’t have the time (or income) to recoup their losses.

But I don’t think conservative investing is right for everyone. If you’re lucky, retirement can be a very long phase of your life, often lasting decades. Over the long term (10 years or more), stocks almost always outperform bond instruments such as corporate bonds and government bonds. If you change your investment strategy too early, you may end up with no money left.

Let’s look at a simple example. Let’s say you retire at age 65 with about $600,000. Let’s also assume you need money that will last you until you’re 90, that you expect your annual spending to be about $50,000, and that inflation averages about 3% per year. If you keep your portfolio invested in stocks and earn a long-term average annual return of about 10%, you will have about $300,000 left in your portfolio when you turn 90. However, switching your portfolio to bonds leaves you with about $300,000 in long-term income. With an average annual interest rate of only 6%, you will run out of money by the time you are 80!

Maintaining an aggressive investment strategy is not for everyone. But don’t forget that retirement is a long-term game. Giving up on the stock market too early can significantly reduce your financial independence later in life. Want to increase your retirement savings? Stick with stocks for as long as it suits you.