Date: 04 Jan 2017
Cat: Audio, Financial Hour (WHO)

Financial Hour: Funding 30-40 Years in Retirement

Funding 30-40 Years of Retirement

If you live to 100, can you avoid outliving your money?

  • The Centers for Disease Control reported that the population of Americans aged 100 or older rose 44% between 2000-2014.
  • The Pew Research Center says that the world had more than 4 times as many centenarians in 2015 as it did in 1990.

If you do live to 100, will your money last as long as you do? What financial steps can help you maintain your retirement savings and income?

 Keep Investing:

  • Many investors believe that they need to become very conservative as they approach and enter retirement. But the reality is, they spend more years in retirement than they did working.
  • The S&P 500 does not automatically gain 10% or more each year, but it certainly has the potential to do so in any year.
  • As the benchmark interest rate is still relatively low, fixed-rate investments are not producing anything close to double-digit returns, with some even failing to keep up with the current inflation rate.
  • Turning away from equity investments in retirement may seriously hinder the growth of your savings and your level of income.

Arrange An Income Stream:

  • If you can retire with a pension, great; if not, you may want other income streams besides Social Security.
  • Renting out property may provide this, although the cost of third-party managements can cut into your revenue.
  • Dividends can function like a passive income stream, albeit a highly variable one.
  • Even part-time work or consulting is an option to consider for creating extra income.

Hold Off on Social Security (If You Can):

  • If you are in reasonably good health, and think you may live into your 90s or beyond, than retiring later and claiming Social Security later can make great financial sense.
  • If you wait to claim your benefits at Full Retirement Age (which will range from 66 to 67 depending on your birthdate), you will have fewer years of retirement to fund than if you left work at 62 and claimed benefits immediately.
  • By continuing to work, you are also allowing your retirement savings a few more years of potential growth.

Funding 30-40 years of retirement will be a major financial challenge. The earlier you plan & investment to meet that challenge, the better.