In our last post we suggested that consumers should really try to assess how long should you plan for your nest egg to last. What this question is really asking is how long will you live? And also how long will your spouse live. No one really knows, however you can look for indicators such as how long your parents, uncles and aunts lived. This is a good indicator from a genetic perspective. There could be all kinds of external issues such as health and accidents, but you really 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 5 years to that life span to reflect we have better health care and we have lived generally in a healthier manner over the years.
Next take a look at your extended family to assess if there are any that lived significantly longer. Compare your health to that person and make an adjustment to the average number you calculated earlier with the 5 years also added.
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 of some kind that takes into account the income you should make on 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.
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