In our last post, we suggested that consumers assess how long they should plan for their nest egg to last. What this question is asking is how long you will live. And also how long your spouse will live. No one knows. However, you can look for indicators such as how long your parents, uncles, and aunts lived. This statistic is a good indicator from a genetic perspective. There could be many external issues, such as health and accidents, but you have to ignore these. No one can tell what will happen in the next 5 minutes, let alone years from now.
How Long Should You Plan For Your Nest Egg to Last
If you want to be conservative, take the average age of your parents and add at least five years to that life span to reflect that we have better health care and have lived generally in a healthier manner over the years.
Next, examine your extended family to determine if any members lived significantly longer. Compare your health to that person’s and adjust the average number you calculated earlier, adding 5 years.
If you plan to retire at a specific age, you now have an indicator of how long you need your savings to last. This answers the question of how long should you plan your nest egg to last. From here, you can use a calculator that considers the income you should make from your investments and how much you should withdraw each year. Our previous post gave a simple method of calculating this number.
The longer answer is that you must take into account your investments, what income you can expect from them, what the inflation rate will be, and how the markets will change over the years. This is a complicated calculation, and most advisers will be happy to help you with developing a conservative answer.
If you want more ideas about your lifestyle decisions, click here.