Will You Outlive Your Retirement Savings?

Posted By: Jeremy Reif
Mon, Dec 30, 2019
Will You Outlive Your Retirement Savings?

Will you live to see your 100th birthday? While it used to seem like a rare event, the world was home to nearly half a million centenarians (people age 100 and older) in 2015. To put that in perspective, that is a more than fourfold increase since 1990 and is expected to continue to increase eightfold by 2050.[1] In the past 30 years alone, the U.S. centenarian population has grown 65.8%.[2]

So it’s understandable why one of the top retirement anxieties Americans face is the fear of running out of money in retirement, with only 27% of pre-retirees believing they’ll be ready financially for a retirement lasting 10 years[3] and 51% unsure if their savings will last until they are 100.[4] Since no one wants to live under that cloud of worry, here are some ways to sustain and grow your retirement funds so they last as long as you do.

Planning For The Unknown

In retirement planning, this risk of living longer than expected is known as longevity risk. Today, males and females who are 65 today are expected to live to 84 and 86.5, respectively, but one in three will surpass the 90-year mark, and one in seven will live past 95.[5]

Based on these statistics, you could be looking at a 30-year retirement instead of 20. Ten years can financially make or break your living situation. But, as much as we wish we could, there’s no way we can predict how long we will live, and this makes planning complicated. Retirees need to secure an adequate stream of income for an unpredictable length of time. If you plan to live to age 82, and you end up living until 92, how are you going to stretch your savings to last the additional 10 years?

Set Realistic Expectations

Wise planning starts with a realistic expectation of life expectancy using life expectancy tables, as well as considering personal and family health history. Because it would be much worse to outlive your money than the other way around, it’s also essential to factor in 5-10 extra years to your life expectancy number so that you will be covered until the end of your life.

It’s also important to think through what you want your retirement to look like. Retirement often means major lifestyle changes and, as a result, your expectations may need to change as well. If you want a comfortable retirement, you may have to rethink how much you will be able to give your children as a down payment on a house or an inheritance. You may need to downsize your home or relocate to a more affordable area. Stay flexible and be willing to make adjustments in order to secure your financial future.

Don’t Rely Solely On Social Security

Social Security is a major part of your retirement game plan, but it was only designed to replace 40% of an average worker’s wages.[6] Not only that, but with Social Security predicted to dry up by 2035, benefit payments could shrink to 80% of what Americans expect.[7] So not only should you not rely completely on Social Security to fund your retirement, but you should also get a Social Security claiming strategy in place to maximize your benefits.

Prepare For Healthcare Costs

According to the Employee Benefits Research Institute, the average couple at age 65 will require anywhere from $157,000 to $392,000 in healthcare costs.[8] Most people don’t even have that much in their retirement accounts to live on, let alone cover medical costs. Even with Medicare, there could be significant out-of-pocket expenses and many conditions and treatments that are not covered. Create contingency funds to offset the damage healthcare costs could do to your retirement income and consider long-term care insurance and a Health Savings Account.

Find Alternative Income Streams

There are also a variety of investment strategies and products that can provide you with a steady stream of income throughout your retirement years, such as annuities. Delaying your Social Security claim, as well as finding creative ways to earn income when you retire can also add years to your retirement savings. If it’s possible for your situation, consider working longer, even if it’s part-time or as a self-employed individual. Earning just $20,000 a year for five to ten years can push out your retirement savings further than you think.

Don’t Wait

There’s no way to predict exactly how long you will live, but don’t let the fear of the unknown hinder you from being proactive. Work with an experienced financial professional to create a strategy that will reduce the impact of longevity risk on your finances. No strings attached, I am here to help you and point you in the right direction. Schedule a call and meet me virtually to find out what path your current plan is on.


About Jeremy Reif, CRPS®
Jeremy Reif is an independent financial advisor with more than a decade of experience in the financial services industry. He is also the owner of Point Wealth, LLC, an independent financial planning and investment management firm. With advanced credentials and training in retirement planning and financial planning, Jeremy focuses on helping individuals and families pursue financial independence. Regardless of the services he’s providing, he focuses on talking openly about financial planning, the industry, common questions about retirement planning, and more to help everyday investors gain more confidence in their financial opportunities. Based in Wausau, Wisconsin, Jeremy serves clients throughout the state and can work virtually with clients throughout the country. To learn more, visit http://pointwealthmanagement.com and connect with Jeremy on LinkedIn.
Advisory services are offered through Point Wealth, LLC, an Investment Advisor in the State of WI. Whenever you invest, you are at risk of loss of principal as the market fluctuates. Past performance is not indicative of future results. Purchases are subject to suitability. This requires a review of an investor’s objective, risk tolerance, and time horizons. Investing always involves risk and possible loss of capital.
Point Wealth, LLC is not affiliated with or endorsed by the Social Security Administration or any government agency.
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