What steps might help you sustain and grow your retirement savings?
Retirees
face greater “longevity risk” today. According to an analysis of Census Bureau data
by the Center for Retirement Research at Boston College, the average retirement
age in this country is 65 for men and 63 for women. Many of us will probably
live into our eighties and nineties; indeed, many of our parents have already
lived that long. In 2014 (the most recent year for which Census Bureau data is
available), over 72,000 Americans were centenarians, representing a 44%
increase since 2000.2,3
If your retirement lasts 20, 30, or even 40 years, how well do you
think your retirement savings will hold up? What financial steps could you take
in your retirement to prevent those savings from eroding? As you think ahead, consider
the following possibilities and realities.
Realize that Social Security benefits
might shrink in the future. Today,
there are three workers funding Social Security for every retiree. By federal
estimates, there will be only two workers funding Social Security for every retiree
in 2030. That does not bode well for the health of the program, especially since
nearly one-fifth of Americans will be 65 or older in 2030.4
Social Security’s trust fund is projected to run dry by 2034, and it is
quite possible Congress may intervene to rescue it before then. Still, the
strain on Social Security will mount over the next 20 years as more and more baby
boomers retire. With this in mind, there’s no reason not to investigate other
potential retirement income sources now.3
Understand that you may need to work part-time
in your sixties and seventies. The
income from part-time work can be an economic lifesaver for retirees. Suppose
you walk away from your career with $500,000 in retirement savings. In your
first year of retirement, you decide to withdraw 4% of that for income, or
$20,000. At that withdrawal rate, not even adjusting for inflation, that money
will be gone in 21 years. What if you worked part-time and earned
$20,000-30,000 a year? If you can do that for five or ten years, you effectively
give your retirement savings five or ten more years to last and grow.3
Retire with health insurance and prepare
adequately for out-of-pocket costs. Financially
speaking, this may be the most frustrating part of retirement. We can enroll in Medicare at age 65,
but how do we handle the premiums for private health insurance if we retire
before then? Striving to work until you are eligible for Medicare makes
economic sense. So does building some kind of health care emergency fund for
out-of-pocket costs. According to data from Health
Affairs, those costs approached $16,000 a year in 2014 for Americans aged
65-84, and $35,000 a year for Americans aged 85 or older.4
Many people may retire unaware of these
financial factors. With luck and a
favorable investing climate, their retirement savings may last a long time.
Luck is not a plan, however, and hope is not a strategy. Those who are retiring
unaware of these factors may risk outliving their money.
This material was prepared by MarketingPro,
Inc., and does not necessarily represent the views of the presenting party, nor
their affiliates. This information has been derived from sources believed to be
accurate. Please note - investing involves risk, and past performance is no
guarantee of future results. The publisher is not engaged in rendering legal,
accounting or other professional services. If assistance is needed, the reader
is advised to engage the services of a competent professional. This information
should not be construed as investment, tax or legal advice and may not be
relied on for the purpose of avoiding any Federal tax penalty. This is neither
a solicitation nor recommendation to purchase or sell any investment or
insurance product or service, and should not be relied upon as such. All
indices are unmanaged and are not illustrative of any particular investment.
03112016-WR-1581
Citations.
1 -
usatoday.com/story/money/personalfinance/2014/09/24/investors-fear-outliving-retirement-savings/16095591/
[9/24/14]
2 - thestreet.com/story/13468811/1/here-rsquo-s-how-to-make-your-money-last-in-retirement.html
[2/23/16]
3 - marketwatch.com/story/so-whos-going-to-pay-for-you-to-live-to-be-100-2016-02-17/
[2/17/16]
4 -
thinkadvisor.com/2016/02/22/6-ways-to-prevent-going-broke-in-retirement [2/22/16]