When considering your retirement strategy, do you think about how long you might live? It can be uncomfortable to consider, but it should be thought.
For many people preparing for retirement, one of the biggest fears is running out of money. If you've lived to 65 years, you will probably live to at least 84 years if you're male and 87 years if you're female, according to Social Security tables. These are only estimates, but it's important to keep in mind that you might live much longer than you expect, and some household members could outlive others by many years.1
You might, in fact, live to 100 years and beyond: the National Institute on Aging anticipates that the number of centenarians will grow by a factor of 10 during the first half of this century, representing a host of challenges for anyone attempting to devise a retirement strategy.1
For example, healthcare costs must be incorporated. As you age, your healthcare needs will likely grow from simple doctor's visits to potentially living in an extended care facility. These costs naturally increase over time, whether through inflation, market volatility, or other factors. So, while you can look at today's prices as a guide, you will likely need much more money to cover your healthcare. Medicare will help, but it doesn't cover everything, including a lengthy stay in extended care.2
Your retirement strategy might include a spending plan that considers the likelihood that you will want to travel, pursue your interests, and spend time with family, as well as that allows for a long life and covers the associated financial expenditures. Unless you are working beyond retirement age, it can be difficult to make up for a market dip, emergency expense, or heavy spending, so your strategy should cover many circumstances.
How much will you need to withdraw per year without diminishing your account too quickly, while still controlling for inflation and other factors? Calculating this as part of your retirement strategy may be essential. While some financial professionals have downplayed the 4% rule in recent years—the amount of your investments used in the first year of retirement—and have revised it upward or downward as needed, the theory is that you may be able to live on your retirement funds for upwards of 30 years or more.3
Other factors to consider include focusing on tax-efficient withdrawals from your retirement accounts. You might also decide that working longer or taking Social Security later (allowing for larger payouts per month) could extend your retirement strategy further. Our team, California Retirement Advisors, will address these topics and others with you to form a retirement strategy and put it into action. Feel free to contact us today at cradivsors.com or call us at 888-643-7472. If nothing else, you should now appreciate what a significant undertaking your retirement strategy represents, as well as how relieving it will be to have help along the way.
By Christian Cordoba
CERTIFIED FINANCIAL PLANNER™
Founder, California Retirement Advisors
Investment advisory services offered through Mutual Advisors, LLC DBA California Retirement Advisors, a SEC registered investment adviser. Securities offered through Mutual Securities, Inc., member FINRA/SIPC. Mutual Securities, Inc. and Mutual Advisors, LLC are affiliated companies. CA Insurance license #0B09076. This content is developed from sources believed to be providing accurate information and provided by California Retirement Advisors. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. California Retirement Advisors, nor any of its members, are tax accountants or legal attorneys and do not provide tax or legal advice. For tax or legal advice, you should consult your tax or legal professional.