Are you ready for a 40 year retirement?
LONGEVITY …… It’s the worst of all possible risks for your retirement because it lengthens all the other possible risks; sequence of return risk, market risk, interest rate risk, tax risk, health risk, long-term care risk. Longevity makes your retirement a lot more susceptible to running out of money.
Back in a day not so long-ago people retired and lived into retirement 15 to 20 years. Not at all unheard of. However, in recent years the Centers for Disease Control has provided data that tells us that even though the statistics are out there, longevity isn’t uniform across the population. Life choices, education, income, and health care all come into play and the likelihood is that one can expect to live a lot longer than the average.
It is estimated that 40% of retirees underestimate life expectancy, which will mean that they are underestimating how long their money can last. More years means you will spend more.
As living longer becomes a greater obstacle, it’s important that we review our retirement plan over time.
Issues to consider depending on where you fall are:
- Do we have the ability to work longer.
- Are we putting too much hope on investment performance or are you too scared of the market? Each has its problems but it’s important that you review and understand how the stock market works and use it in the right way. If you do that, you will be deeply rewarded.
- Depending on where your income comes from in retirement, if you are solely dependent on systematic withdrawals, (usually the withdraw of 4% a year), chances are that in a very long retirement your plan will not work. Especially, if you have experienced down markets early on.
- You must have some kind of longevity insurance. The term annuity has toxic overtones in some circles but you will NEVER find ANY OTHER investment that will provide you with a risk less stream of income for both you and your spouse. And the longer you live, the more income you will make.
So yes, a 30 to 40 year retirement is more common now than ever before. Are you ready?
If you have additional questions, especially on how to legally minimize your taxes, make sure to contact us for answers.
