Do You Have A 50/50 Chance Of Running Out Of Money?

birthday 100+ final

More and more Americans are celebrating their 100th birthday.

One of the hardest tasks for financial planners is estimating how long your money needs to last. It depends, of course, on how long you live, and that’s something no one can know.

We try to be conservative in our assumptions so your money doesn’t run out. “It’s far better to die with money in the bank than to live one’s later years in poverty,” says David Blanchett, head of retirement research at Morningstar Investment Management, and an expert on longevity and retirement withdrawal strategies.

The fact is that people are living longer.  In 1980, the average 65-year-old man lived to age 79. Now, that same person is expected to live to 83.

The odds are high – especially for healthier and wealthier retirees –  that one member of a 65-year old couple will live to 95.

And those odds are continually increasing.

“There’s a 50/50 chance that either member of a couple of 50-year-olds planning to retire in 15 years will live more than 30 years after retirement,” says Blanchett.

That means we have to plan on your money lasting at least 30 years in retirement. That’s a serious challenge in a world of low interest rates and ever increasing health costs.

So here’s 3 simple tips to make sure your nest egg stays well-feathered.

Play the odds. You may not know how long you’ll live, but there are a lot of factors you can control. You control when you start saving for retirement and how much you set aside. Many of our most secure retirees never made big salaries, or scored an inheritance. You control when you retire, when you take Social Security and how large you live. Your choices can turn the odds in your favor, or against you.

Don’t party like it’s 1999.  Withdraw judiciously from your investment accounts, keeping withdrawals near 4% of market value per year. Take more than that, and you risk depleting your portfolio if investment markets get rocky. (As part of our ongoing services, we monitor clients’ withdrawal rates to help them stay on track. It’s easy to get carried away and get yourself into trouble).

Tiny bubbles.  Invest well. Most people need a mix of growth and income – and a well-diversified portfolio – to avoid getting decimated by bubbles and meltdowns. With 30 years or more ahead of you, investing for retirement is a marathon, not a sprint.


About Mari Adam

Mari Adam, Certified Financial Planner™ has been helping individuals and families chart their financial futures for over twenty-five years. Have a question about your financial situation? Ask Mari!

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