Tag Archives: Outliving Your Money

Will you outlive your retirement plan?

Will you outlive your retirement plan?My wife and I were talking about our investment plan and our retirement the other day. We were discussing how much money we should take out of our savings plan and our retirement pension plan. How much should we enjoy while we’re still healthy. I was talking also about the interest income we’re making on our bonds. Also¬† the dividends that we are collecting from our stocks and how volatile the stock market is. Our planning horizon is roughly 20 years to 25 years.

Her comment about all of this was that this was one of the biggest gambles that we are taking in our lives. Many people will mention that buying a house is the biggest purchase. The biggest gamble that many people will take in their lives is their investments for retirement. I feel that actual retirement planning and making sure that your money will last during your retirement years is by far the biggest money decision.

Will you outlive your retirement plan – Alternatives

Retirement Plan – The 4% Rule

The industry suggests that you should take 4% of your total retirement plan out every year and this is the amount that you should budget for your retirement. They say also that you have an 80% chance of your investment plans lasting your lifetime with this approach.

It takes into account stock market fluctuations both up and down as well as periods of time where the income isn’t sufficient to make up the 4% that you were taking out of your plan. We have found that judicious investment in dividend yielding stocks will yield 4% to 5% over the period that you are planning for and judicious investment in blue-chip corporate bonds will yield between 3% and 5% at the present time.

With this level of income you should be able to generate 4% from your retirement plan with no problems whatsoever.

Retirement Plan – What about the Capital

Don’ttouch the capital. The dividends and interest income are close to 4%. You will have an excellent chance that your money will outlast your retirement years.

Monitoring your investments every year and working with an advisor will help you manage your investments to ensure that you have sufficient income and money to last during your retirement. It is one of the most critical things that you can do during retirement years.

Also make sure that your retirement plan is set up so that it can run on automatic pilot, should you not be healthy enough to administer your retirement plan. While you are healthy now, can make decisions etc, there may come a time when your financial adviser will need direction as to how to handle your money. Your living will can also specify how your money should be managed and designate a family member to make those decisions.

Don’t worry about outliving your money!

outliving your moneyDepending on who you talk to, someone who retires at age 65 will have another 20 years or so to live. This is a according to the statistics that are published by many government agencies as well as insurance companies. When you hear someone say. Don’t worry about outliving your money, it is difficult to really believe them. It can be a stressful time for many retirees. So it is important to really examine the numbers and determine of your savings will out last you.

Insurance companies tend to exaggerate on the longevity. They will suggest that you may live between 20 and 25 years longer than the average person. They also put fear into consumers wondering whether their money will last during their retirement years. This to encourage you to invest with them and use their investment products.

Outliving Your Savings

Many people worry about whether they will outlive their savings and end up being destitute. They worry about having to sell her house. Or live with family or worse living conditions that are not acceptable to them.

The reality is that most people will not outlive their savings.The statistics of living 20 years beyond your retirement age of 65 are actually quite generous. Most people will not live that long. Planning to live 20 years beyond your retirement age is quite substantial.

The reality for most people is that they should look at how long their parents lived after age 65. Then add five more years because we are more healthy and look after ourselves better than her parents did. This will be an indicator of the real age that you can expect to live.

Based on these calculations you can then figure out how long your money needs to last after your retirement. This is one of the ways that you can calculate your longevity.

Don’t worry about outliving your money

There are actually many other factors that will determine whether you have sufficient retirement money in your savings to last your lifetime.

For example the stock market may go up or down, your pension from your company may last or not and you may have health issues which dig into your retirement savings. These factors and others are things that you should be thinking about and considering in terms of how much money you spend during your retirement years.

At the same time while you’re healthy you will want to enjoy your retirement years and spend some of your money on travel or some of the other things that are attractive to you.

Living on the income that is generated from your investments is one way to protect your retirement savings. At the same time if you have a significant amount of capital in your retirement plan making sure that you’re diversified and well invested in blue-chip stocks and bonds will also ensure that you do not suffer from crashes in the market.

The average withdrawal rate of 4% appears to be the industry norm of how much money should be withdrawn from your retirement savings plan. If you can generate income from the interest income from bonds, and from stocks to dividends this will help to achieve a significant amount of that 4% and protect your capital through your retirement years.

We are writing many articles about these subjects and look forward to comments from people who are going through and planning their retirement and thinking about the same issues. Your comments and suggestions are welcome.

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