Retirement Strategy: Money & Longevity

When considering your retirement strategy, how much thought do you give to how long you might live? It can be an uncomfortable reality to consider, but this shouldn't dissuade you from giving it some serious thought.

For many people preparing for retirement, one of the biggest fears is running out of money. If you've lived to 65 years, you will probably live to at least 84 years if you're male and 87 years if you're female, according to Social Security tables. These are only estimates, but it's important to keep in mind that you might live much longer than you expect, and some household members could outlive others by many years.1

You might, in fact, live to 100 years and beyond: the National Institute on Aging anticipates that the number of centenarians will grow by a factor of 10 during the first half of this century, representing a host of challenges for anyone attempting to devise a retirement strategy.1

For example, healthcare costs must be incorporated. As you age, your healthcare needs will likely grow from simple doctor's visits to potentially living in an extended care facility. These costs naturally increase over time, whether through inflation, market volatility, or other factors. So, while you can look at today's prices as a guide, you will likely need much more money to cover your healthcare. Medicare will help, but it doesn't cover everything, including a lengthy stay in extended care.2

Your retirement strategy might include a spending plan that considers the likelihood that you will want to travel, pursue your interests, and spend time with family, as well as that allows for a long life and covers the associated financial expenditures. Unless you are working beyond retirement age, it can be difficult to make up for a market dip, emergency expense, or heavy spending, so your strategy should cover many circumstances.

How much will you need to withdraw per year without diminishing your account too quickly, while still controlling for inflation and other factors? Calculating this as part of your retirement strategy may be essential. While some financial professionals have downplayed the 4% rule in recent years—the amount of your investments used in the first year of retirement—and have revised it upward or downward as needed, the theory is that you may be able to live on your retirement funds for upwards of 30 years or more.3

Other factors to consider include focusing on tax-efficient withdrawals from your retirement accounts. You might also decide that working longer or taking Social Security later (allowing for larger payouts per month) could extend your retirement strategy further. Of course, these topics and others will be addressed while working with a financial professional to form a retirement strategy and put it into action. If nothing else, you should now appreciate what a significant undertaking your retirement strategy represents, as well as how relieving it will be to have help along the way.

Retirement Planning in Kansas City

One of the most important things to consider when retiring is your financial situation. We work to ensure you have a true understanding of your expenses and how much income you will need to live the retirement lifestyle of your dreams. There are many questions to be answered when developing an accurate retirement strategy. What age do you plan to retire? How much money will you need to live comfortably? How much should you plan for medical expenses? Will you continue working part-time? Or will you rely on pension, social security, investments, and savings?

If you’re like many others, this can all feel a bit overwhelming. Take the first step by meeting with a financial advisor. Buttonwood Financial Group can assess your retirement needs and develop a plan for your unique situation. With our partnership, we can effectively strategize for the retirement you have worked so hard for. Contact us today to learn more.

1. https://www.rbcwealthmanagement.com/en-us/insights/will-you-outlive-your-money-in-retirement-3-risks-to-plan-for-now
2. https://www.npr.org/2022/02/19/1081875948/inflation-has-many-retirees-worried-about-outliving-their-savings
3. https://www.cnbc.com/select/what-is-the-4-percent-retirement-savings-rule/

This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.