Annebek / iStock.com
Commitment to our readers
The GOBankingRates editorial team is committed to providing you with unbiased reviews and information. We use data-driven methods to evaluate financial products and services – our reviews and ratings are not influenced by advertisers. You can read more about our editorial guidelines and our review methodology for products and services.
20 years
Helping you become richer
trusted by
millions of readers
There is a lot of information available about how to save for retirement.
However, what isn’t talked about much is how to spend in retirement. In other words, how to make your money last for 30 years or more. GOBankingRates asked ChatGPT how to build retirement money for over 30 years.
Plan your evacuation
To ensure you don’t run out of money, you’ll need to make your withdrawals based on your account balance. The knowledge of living within your means is even more important in retirement.
The 4% rule is a good starting point. However, chances are you’ll be unlucky and end up with negative returns and high inflation in the first few years of retirement. For this reason, ChatGPT identified a more conservative option of withdrawal of 3% to 3.5% per year.
View your asset allocation
Conventional wisdom says to invest more conservatively as you age. That said, you don’t want to be too conservative, as that means you could miss a market rally that could really give your portfolio a boost when it needs it.
ChatGPT suggests 50% to 65% in stocks, 25% to 40% in bonds, and 5% to 10% in cash.
Beware of three risks
ChatGPT cites three risks that can derail a retiree’s well-thought-out spending plan.
- inflation: Plan for 2.5% to 3% annual inflation, and know what steps should be taken to deal with higher than average inflation.
- Health care: As you age, health care costs generally increase. Using money in a health savings account can be a good way to use pre-tax money for health care, so maximize your contribution to it if you can.
- Tax: Pay attention to your taxes when withdrawing money from your retirement savings.
Get the Most Out of Social Security
Delaying your Social Security benefits until age 70 can be a big help in terms of bringing in a larger income stream. After full retirement age, your Social Security benefit increases by about 8% per year until age 70 if you don’t file.
This means a larger benefit every month from age 70, which could be significant if you live a long time.
Plan ahead for the coming years
We hear a lot about average returns when talking about the market. But once you start withdrawing money from your investments, averaging becomes less important than the sequence of returns. If your first two or three years of retirement are short, you’ll have a lot to prepare for in the years ahead.
You can plan for the down years in two ways: Know where you can cut back and spend less until the market returns and keep one to two years’ worth of expenses in cash.
Review your plan annually
You don’t want to be tracking expenses and tracking your investments every day in your retirement, but an annual review is a good idea.
Rebalance your portfolio to maintain the asset allocation you’ve planned, check your withdrawal rate and adjust your spending for current market conditions. And avoid reacting to headlines.
Editor’s Note: This article is for informational purposes only and does not constitute financial advice. Investing involves risk, including possible loss of principal. Always consider your individual circumstances and consult a qualified financial advisor before making investment decisions.