I am often asked, “how do I avoid outliving my retirement nest egg?”
Making your savings last through retirement used to be easy: retire at 65, start collecting your pension and Social Security, invest in mutual funds and bonds, and withdraw 4% annually to fill the income gaps. With a relatively low life expectancy, most anticipated retirement only lasting a few years anyway.
My, how times have changed! Interest rates are at historic lows, pensions are rare, and longevity is on the rise as advances in healthcare and quality of life boost the average life expectancy higher and higher. Sure, you can still retire, but your bonds may only earn 2-3% and recent market volatility can cause fears around investment sustainability. Making your money outlast retirement is a key financial challenge many people are likely to face.
Numerous factors can impact your retirement finances. Often these can be uncontrollable or unpredictable, such as health/long term care costs, portfolio returns, life expectancy, and care and support for family (aging parents and/or adult children). As a result, your income needs in retirement may be a moving target.
To prepare for this, it helps to lay out a dynamic, comprehensive plan. You want a strategy that is fluid, which evolves as your life evolves and takes into consideration the “what if” scenarios that may occur as challenges unfold. Consider how your needs may impact multiple generations of your family, and consult with individuals and professionals that can provide the experienced perspective you may lack.
Your picture of an ideal retirement may differ at age 80 versus age 65, when you started on this new adventure. As your goals, needs, and desires shift, so too should your financial plan.
Future investment performance cannot be guaranteed, investment yields will fluctuate with market conditions. Investing involves risk and investors may incur a profit or a loss. Ad Approval #2443951