Will I Outlive My Money?

February 08, 2018

One of the greatest questions older Americans face as they think about retirement is, “What will it cost?” There is no simple answer, but one thing is likely: it will cost more than you think.

According to a 2017 study¹, the average cost of retirement is nearly $740,000.

The sobering truth is that most of us haven’t really thought about it. Only 16% of people over 50 in the same study admitted to being prepared for a retirement that lasts 20 years.¹

Meanwhile,

Life expectancy is on the rise
American men and women who are age 65 today can expect to live another 19 to 21 years, respectively².

Health care costs are on the rise
A 65-year-old couple in 2017 can anticipate medical costs in retirement to add up to more than $400,000 for insurance premiums and out-of-pocket expenses.³

Shifts in finances may not match shifts in priorities
The prospect of maintaining a budget that amounts to 70-80% of pre-retirement earnings can be daunting. Many of us don’t want to think about lowering our standard of living, especially when retirement is often a time to travel more, spend more time with family, and enjoy more leisure activities.

Suddenly, what seems like a good amount of money doesn’t seem like it will go as far as we want.

How Can I Plan?

1) Pay down your debt

At Allworth Financial, we strongly encourage our clients to pay off their debt before they retire. This is just as important, if not more so than saving. When it comes to expenses and debt management, money that is NOT going out is the same as money coming in.

Your primary goal here is to cover fixed costs with fixed income. Think of fixed costs as those that stay consistent over time, such as:

Mortgage or rent
Car payments
Insurance
Utilities
Service payments
Real estate taxes

Fixed income sources include those from which you receive regular dividends or interest, such as:

Social Security
Pensions
Annuities
Investment accounts
Money markets
CDs

The key here is to get a clear handle on your expenses so you can plan for a retirement with little to no debt with a strategy that covers your costs.

2) Get a baseline figure

You can access excellent tools right at your fingertips that can help you make realistic calculations for retirement planning.

The Social Security website provides actuarial life tables as well as a life expectancy calculator that project your longevity.

Other sites, such as Better Health Advisors will work with you to drill down more specifically on your health status and assess what your future healthcare needs and goals will be.

To be sure, these resources and others can help you strategize how much to save, how much to invest, when to collect Social Security and how much to draw down from other benefits and income sources.

If you use these tools, you may even come up with a reasonable plan, such as: “I have nearly $1 million in retirement funds, and that should cover my expenses and my healthcare needs for the next 20 years.”

But remember, even the best-laid plans are only ballpark guesses. It’s important to regularly review and adjust your plan as needed.

3) Change your thinking

This is where we challenge you to think differently. The better question to ask is not “How long will my money last,” but “How will I make my money last?”

When it comes to your nest egg, you don’t want to keep tapping it until it’s dry. You want to keep it active. That is, keep it working for you so that your hard-earned investments can continue to generate income and keep you golden.

Rather than thinking about how to cover finances for a specific number of years, we like to encourage our clients to think about retirement as endless.

Instead of looking at how much money you have accrued, what’s most important is what you do with that money to make it last indefinitely.

Volatile markets and changes in interest rates will affect the strategies you need to employ to maximize your investments and preserve your principal. That’s why a trusted and credentialed advisor can help in finding the best income withdrawal strategy that meets your needs in our ever-fluctuating financial environment.

Conclusion: Will I Outlive My Money?

The future may be uncertain, but you don’t have to be. A well-thought-out plan and a balanced portfolio can help you develop an income distribution strategy to preserve the assets you have for decades to come.

Think differently about retirement. Consider working with a trusted financial advisor to help you make that difference today.

1. https://mlaem.fs.ml.com/content/dam/ML/Articles/pdf/ML_Finance-Study-Report_2017.pdf
2. https://www.ssa.gov/planners/lifeexpectancy.html
3. http://www.hvsfinancial.com/2017/06/12/2017-retirement-health-care-costs-data-report/
4. http://www.longevityillustrator.org/

Advisory services offered through Allworth Financial, a Registered Investment Advisor | Disclosures | Privacy Policy

Securities offered through AW Securities, a Registered Broker/Dealer, member FINRA/SIPC. Check the background of this firm on FINRA's BrokerCheck.

HMRN Insurance Agency, LLC license #0D34087

¹Barron’s 2024 Top 100 RIA Firms. Barron's© magazine is a trademark of Dow Jones L.P. The ranking of independent advisory companies is based on assets managed by the firms, growth, technology spending, succession planning, and other metrics.

² Retention Rate Source: Allworth Internal Data, FY 2022

³ The NBRI Circle of Excellence Award is bestowed upon NBRI clients meeting one or both of the following criteria: Total Company score at or above the 75th percentile of the NBRI ClearPath Benchmarking Database and/or improvement of five (5) or more benchmarking percentiles in Total Company score over the previous survey.

⁴ As of 7/1/2024, Allworth Financial, an SEC registered investment adviser and AW Securities, a registered broker/dealer have approximately $22.5 billion in total assets under management and administration.

⁵ InvestmentNews 2020 and 2021 Best Places to Work for Financial Advisers. The ranking reflects survey responses and scores completed by both employers and employees. Employers report their organization’s workplace policies, practices, and demographics. Employees complete a survey designed to measure the employee experience.

⁶ 2021 Value of an Advisor Study / Russel Investments

⁷ Ranked 9th Top Wealth Managers By Growth in Assets in the U.S. from RIA Channel, 2022. RIA Database and RIA Channel are registered trademarks owned by Labworks, LLC.

⁸USA Today Best Financial Advisory Firms 2024. The ranking is based on the growth of the companies’ assets under management (AUM) over the short and long term and the number of recommendations they received from clients and peers.

⁹NBRI Best in Class Ethics 2023. The Best in Class level is bestowed upon clients performing at or above 90 percentile of the NBRI ClearPath Benchmarking Database.

^✢ Scott Hanson, Investment Advisor 2005, 25 most influential people in the financial services industry. The ranking reflects 25 people who Investment Advisor magazine believes have had or will have the greatest influence on the financial services industry.

^✼Pat McClain, InvestmentNews 2014, Invest in Others Community Service Award, presented to an advisor who has made an outstanding impact on a community through managerial contributions to a non-profit organization.

^†Financial Times, FT 300 Top Registered Investment Advisers, June 2019. The ranking reflects six areas of consideration including the company's years in existence, industry certifications of key employees, AUM, asset growth, SEC compliance record and online accessibility and calculates a numeric score for each company.

Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, CFP® (with plaque design) and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements.