What is the tallest financial hurdle for those in retirement? A Stock Market crash? Recession? Inflation? After 20 years and hundreds of conversations on the topic, I’d suggest one of the greatest threats to financial security in retirement may be the risk of outliving your money.
Well — let’s break down how we tackle a Retirement Plan, shall we? The first step in tackling longevity risk is to figure out how much you can realistically afford to withdraw each year from your personal savings and investments. You can tap the expertise of a qualified financial professional to assist you with this task. Or, you can use an online calculator to help you estimate how long your money might
last.
How long might you live in retirement? Think carefully. Your answer could influence whether you have enough money for a comfortable retirement or just scrape by. According to the “bean-counters” at big insurance companies, at least one member of a 65-year-old couple has a 72 percent chance of living to age 85 and a 45 percent chance of living to age 90, according to a 2013 report by the Society of Actuaries.
This suggests that many of us will need to plan. One strategy is to withdraw a conservative 3 percent to 5 percent of your principal each year. However, your annual withdrawal amount will depend on a number of factors, including the overall amount of your retirement pot, your estimated length of retirement, annual market conditions and inflation rate, and your financial goals. For example, do you wish to spend down all of your assets or pass along part of your wealth to family or a charity?
Finally, remember that many people may live 30 or more years in retirement. Any 30-year investment timeframe may need a higher return than today’s savings account offer. Constructing and maintaining a diversified investment portfolio appropriate for your needs and your tolerance for investment risk is crucial. Consult your financial advisor on the matter before making any decisions.
Over the weeks and months to come, we’ll discuss Retirement Planning issues and strategies here on WatertownMANews.com. We even invite your questions as we engage with our readers. If you have a Financial Planning question, please submit your question to watertownmanews@gmail.com and we’ll consider your question for a future article.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
Doug Orifice is a Watertown resident and owner of Arsenal Financial, LLC, www.arsenalfinancial.com. Doug has been helping families and business owners with retirement planning since 1999.
Good material.
My problem is that RMD forces me to take money out that I don’t need now