Retiring with less than $1 million? Here are 8 ways to make your savings last

You’re nearing retirement, but you haven’t saved $1 million. That doesn’t mean you can never retire. Here are 8 financial do’s and don’ts for savers with a six-figure nest egg.

Focus on the amount you’ll need in retirement, rather than how much you’ve accumulated. Realize that your wants may decline as you age. Consider Social Security as your inflation-protected lifetime income stream, as well as any other pension.

Don’t try to use interest and dividends for your cash flow needs. That would limit your return and eliminate inflation protection. Invest in a diversified mix of stocks and bonds, take some of your distributions out of capital gains, and leave a little extra for inflation.

If you haven’t saved enough to make up the difference between Social Security and your income needs, consider downsizing your home, taking out a reverse mortgage, or working part time. If you’re still working full time, boost your retirement plan contributions.

Consult with a qualified financial adviser who can calculate the numbers and give you an estimate of your probability of success.

Protect yourself from catastrophic events by paying for health insurance (if you don’t qualify for Medicare yet), long-term-care insurance and umbrella insurance. Sit down with your attorney to draft or update your estate documents. Also, don’t retire without an emergency fund of at least three to six months of living expenses.

If you take your Social Security benefits and plan to continue working part or full time, your benefits could be reduced. If you are younger than full retirement age, your Social Security benefits will be reduced by $1 for every $2 earned over $24,480 (for 2026).

It’s best not to claim benefits until you know you won’t be dinged. If you wait to claim past 67, your benefits will grow 8% a year to 124% of your standard monthly benefit. Consider:

Roth conversions are an important tool during the years between retirement and required minimum distributions. An accountant or adviser can help figure out how much to convert year by year to:

If you convert too much, you might pay too much tax at high brackets during your pre-RMD years. This could result in paying very little or no taxes later on when RMDs are minimized. The result: You’ve cost yourself more in total taxes, and accelerated the payments.

As your taxable income rises, so do your Medicare premiums. For example, a single filer in 2026 with modified adjusted gross income of $109,000 pays the standard Part B premium of $202.90 per month. If their income increases by just one extra dollar to $109,001, their premium jumps to $284.10 per month!

The best thing you can do for your financial security is to avoid credit card debt because of its high nondeductible interest rates. So pay the balance in full each month.

Your debts’ amount and structure, whether car loans or leases, mortgage debt, or equity loans, can have a huge impact on your retirement years. Analyze interest rates and the opportunity cost of paying them down.

By running the plan under different assumptions, you can make better decisions about normal spending and about adjustments in different scenarios, like:

Then revisit your plan after the death of a spouse, changing residences, tax law changes, receiving an inheritance, etc.

Your financial security depends more on your purchasing power than your portfolio balance. Certain costs will increase due to inflation, like healthcare, groceries, entertainment, and rent. But fixed mortgage payments are not affected by inflation.

Thus, your required portfolio draws will increase annually due to inflation even if you don’t change your lifestyle. You can navigate this by structuring your investments and withdrawal strategy to be tax-efficient. Implement a flexible spending strategy that reduces discretionary spending during periods of high inflation or poor market returns.

This article was provided to The Associated Press by Morningstar. For more retirement content, go to https://www.morningstar.com/retirement.

Sheryl Rowling, CPA, is an editorial director, financial adviser for Morningstar.

Related Links:

Morningstar: How To Make Your Money Last in Retirement

https://www.morningstar.com/retirement/take-these-steps-make-your-money-last-retirement

Morningstar: Your Retirement Countdown, With Christine Benz

https://www.morningstar.com/retirement/your-retirement-countdown-with-christine-benz

Morningstar: Retirement Planning for Real Life

https://www.morningstar.com/retirement/retirement-planning-real-life-with-christine-benz

FILE - A tip jar contains one dollar and five dollar bills, Sept. 6, 2017 in New York. (AP Photo/Mark Lennihan, File)

LONDON (AP) — The Bank of England indicated Thursday that the sharp decline in energy prices after the U.S. midterm elections — if sustained — could limit the prospect of further interest rate hikes in the coming months.

After raising its main interest rate for the first time in more than three years to 4% from 3.75%, the bank said the outlook for U.K. borrowing costs largely hinges on what happens with the Iran war.

“We’ve seen encouraging news in the past 48 hours," Bank Gov. Andrew Bailey said at a press briefing following the first interest rate hike since August 2023. “The best thing that can happen is to resolve the conflict in the Middle East; there’s no question about it.”

The heavy losses suffered by the Republican Party in the U.S. midterm elections have been followed by a sharp drop in energy prices. Many believe that it’s now less likely that U.S. President Donald Trump will launch fresh strikes on Iran, with Democrats gaining control of Congress early next year following their big wins this week. Many Republicans, including Vice President JD Vance on Wednesday, blamed the war for the party’s poor performance at the ballot box.

Though Brent crude is down around $15 a barrel this week, trading at $96, that is still more than $30 more expensive than it was at this time last year.

If the decline in oil and gas prices is sustained over the coming weeks, then the expected peak in inflation next summer — which the bank anticipates will reach 5% — could be lower. That could temper the need for future rate hikes, and not just by the Bank of England.

Other central banks, including the U.S. Federal Reserve and the European Central Bank, have raised rates recently in response to the higher inflation stoked by the Iran war, and their interest rate strategies are largely contingent on what happens to energy prices.

Bailey said Thursday's hike “shouldn’t be seen as the first in an inevitable long sequence of hikes” but stressed that the outlook depends on what happens in the war with Iran.

“Unless the conflict in the Middle East is resolved, neither does it seem likely to be the last increase,” he said.

For hard-pressed households facing higher mortgage rates and businesses paying more to access capital, the hope is that Thursday’s rate hike will be the last for some time.

“The path for interest rates is hanging in the balance, with U.S.-Iran hostilities holding the key," said Suren Thiru, ICAEW's chief economist.

The decision to raise interest rates was unanimous given the pickup in inflation this year, though one of the nine members of the Monetary Policy Committee backed an even bigger increase, to 4.25%.

The pressure on rate-setters has grown steadily in recent months. When inflation hit an 11-month high of 3.5% in September — well above the bank's 2% target — it cemented market expectations of a rate hike this month, with potentially more to come in 2027.

The main cause of the spike in inflation this year has been the sharp rise in fuel costs resulting from the Iran war and the ensuing bottlenecks in the Strait of Hormuz, which have squeezed global oil and gas supplies and pushed prices at the pump and household energy bills higher.

“There is now enough inflationary pressure in the pipeline caused by the rise in energy prices that an increase in Bank rate is warranted," Bailey said.

Interest rates in the U.K. had been trending downward from a 15-year high of 5.25% until the U.S. and Israel attacked Iran.

FILE - The facade of the Bank of England is seen in th London on Nov. 2, 2017. (AP Photo/Matt Dunham, File)