Information from the Washington State Department of Financial Institutions

Make Your Money Last Throughout Retirement

Social Security

Your first order of business: Determine when the best time is to start tapping this money.

For example, if you start receiving your Social Security benefits before your "full" retirement age, your benefits will be reduced permanently and perhaps significantly, from what they would be at your full retirement age. On the other hand, if you delay collecting Social Security until after your full retirement age, you can continue to work and still get your full retirement benefits, or even higher benefits, no matter how much you earn.

For help figuring out whether early retirement is better for you, check out Social Security's "Break-Even Age" calculator or call the SSA.

IRAs, 401(k)s and Other Retirement Savings Plans

As with your Social Security and pension benefits, you may want to delay tapping into your retirement accounts as long as possible so they can continue to grow to cover unexpected medical costs in the future or to protect the inheritance for your heirs. However, if you need to supplement your income, Individual Retirement Arrangements (IRA) and other retirement savings can be a good source.

Before you start withdrawing money from your retirement accounts, most financial planners suggest setting a target annual withdrawal rate. Make it low enough to avoid depleting these funds too quickly. You can fine tune your withdrawal strategy each year, preferably with the guidance of your financial or tax advisor.

Home Equity Loans and Lines of Credit

These are loans that use the equity in your house as collateral and often are tax deductible (check with your tax advisor). The equity refers to the difference between what you owe on a house and its current market value.

A home equity loan is a one-time loan for a lump sum, typically at a fixed interest rate. A home equity line of credit works like a credit card in that you can borrow as much as you want up to a pre-set credit limit. The interest rate for a line of credit usually is variable, meaning it could increase or decrease in the future.

In general, the best uses for home equity-type loans are to purchase goods or services with long-term benefits, such as home improvements that add to the value of your property. The riskiest uses of home equity loans include a vacation or a car because you could end up paying a lot in interest charges for a purchase that's only of short-term value or has gone down in value.

Also beware that some unscrupulous people or companies (including home repair contractors) push high-cost, high-risk home equity loans to elderly people and other consumers.

Reverse Mortgages

These are home equity loans available to homeowners age 62 or older. In general, a reverse mortgage is a loan that provides money that can be used for any purpose, and the principal and interest payments typically become due when you move, sell your house or die. A reverse mortgage also differs from other home loans in that you don't need an income to qualify and you don't have to make monthly repayments.

While reverse mortgages can be a valuable source of funds, they also have serious potential drawbacks. In particular, you will be reducing your equity, perhaps substantially, after you add in the interest costs.

For more information on reverse mortgages, visit HUD's website

Life Insurance

People mostly think about life insurance as a source of income when someone dies, but they forget that many insurance policies also can be a source of cash at other times.

If you have a life insurance policy with built-up cash value, you can borrow against that money and either repay the loan with interest or reduce the death benefit accordingly.

Tapping life insurance policies can be complicated (including tax and other implications), and they are not right for everyone. Consider getting guidance from the Washington State Insurance Commissioner at www.insurance.wa.gov.

Avoiding Fraud

In recent years, hundreds of thousands of older investors have lost billions of dollars in regulated investments that were unsuited to their needs, promoted in a misleading fashion, and accompanied by inadequate and unclear disclosure as to commissions, fees, and performance.

Protect yourself by educating yourself about fraud. The Financial Industry Regulatory Authority (FINRA) has put together a great brochure for seniors to help avoid fraud