5 Steps That Help You Avoid Living Longer Than Your Money

Growing old is a privilege, but to do so in prosperity requires some forward planning. Without proper retirement planning you could fall prey to what financial planners call “longevity risk” — outliving your retirement fund.

This means more than just sorting out your contributions to an pension but making a full plan for retiring in style, with enough funds to let you live in comfort for as long as you can expect to live.

Here are a few tips to help you stay prosperous long into old age.

Step No. 1: Claim Social Security later

One of the most significant steps that most people can take is a simple one. Just wait longer to retire.

The “Spend Safely in Retirement” plan suggests waiting until age 70 to claim Social Security, then using the IRS required minimum distribution table to determine how much you can sustainably withdraw from savings each year.

Steve Vernon, a research scholar at the nonprofit Stanford Center on Longevity in Stanford, Calif., worked on a study of nearly 300 different retirement income approaches and found that this strategy was the best way for middle-income people with $100,000 to $1 million saved to create an income stream.

Step No. 2: Account for inflation

According to the Allianz Life Insurance Company, 64% of Americans don’t have a financial plan that addresses the rising cost of living in retirement. Inflation is likely to gradually erode your nest egg, and that can pose a serious threat to your prosperity in retirement.

By developing a plan to address inflation, you can help prevent a squeeze to your retirement lifestyle. One way is to makes your investments remain in at least some stocks, which generally grow faster than inflation.

Step No. 3: Account for rising medical costs

One of the aspects of inflation that is most applicable to retirees is medical inflation. Recent statistics indicate that U.S. healthcare costs are projected to outpace inflation in the broad economy, which it has done in the past as well.

Cost increases for personal health expenditures are projected to rise by 2.2% annually, vs. 1.9% for inflation, which makes it all the more important to adequately plan for expenses related to healthcare.

Step No. 4: Account for changing interest rates

Depending on your allocation, rising or falling interest rates can result changes to your investments that could increase or decrease your overall risks.

If you have not already retired, changing rates could mean you need to set aside more and more of your money each month just to keep your retirement plan on track. Or, you can cushion the impact of by investing in products that offset the changes in interest return.

Step No. 5: Estimate your life expectancy

Ultimately, how much money you need depends on how long you are likely to live. However, while life expectancy represents the number of years on average someone of a given age is expected to live, you could still be around for much longer than that.

Some tools, like the Actuaries Longevity Illustrator, allow you to plug age and health information in to get an idea of the probabilities behind you living to a certain age. This can be very useful for planning to longer horizons.

Recommended Articles

3 Ways to Save Money and Make Sure You Get the Absolutely Best Deal

Marketing is meant to get the word out about the "latest and greatest" products, but new doesn't always mean better. From electronics, to clothes and dining room sets, always remember,

Options: Why Buy Puts? To Make Money When You Think a Stock Will Fall in Price

Beginning options investors often struggle with the concept of put options. They have no trouble with call options. With calls, beginners usually grasp that you will buy a predetermined number

Bitcoin Zooming Higher Again. Speculation or the Future of Money?

As Bitcoin threatens to break through its record highs set a few years ago, at least some people are likely to get involved in speculating in them again. Many seem

5 Proven Ways to Earn Powerful Side Income

If you want to earn extra money with relative ease, whether it is to save up for retirement or prepare for a well-deserved vacation, one of the best things you

zto

Day Trading Now: Stock Too Expensive? Buy a Slice

The cost to build a diversified stock portfolio is often the highest barrier for new investors. The outlay required to buy a basket stocks is more than the dollars available.

Looking for Better Returns? 5 Ways to Invest in Brazil

Brazil is known for tourist attractions, its natural beauty and soccer. The former Portuguese colony is also a thriving multicultural country — a melting pot not unlike the United States.

Add Some Spice to Your Portfolio with This Consumer Staple Stock

When the vaccine results from Pfizer (PFE) were announced on November 9, it sent the stock market on a wild ride. Sectors that had been underperforming the overall market screamed

Iaccino: Market Volatility Here to Stay

Bob Iaccino, editor of the Stock Think Tank, talks about Amazon's move into prescription drugs and market volatility on Bloomberg News.

Beat the system by understanding both sides of the trade, reward and risk. Get Bob Iaccino's Stock Think Tank newsletter through this special offer.

Are Cannabis Stocks a Good Investment for 2021?

Cannabis and CBD oils are booming industries.  Economies see a massive boost of billions of dollars when these two hit the scene. From recreational to medicinal, these plants offer a

The Benefits and Pitfalls of Trading Options on ETFs

An exchange-traded fund (ETF) is a collection of assets that track specific investment categories. For instance, SPY tracks the S&P 500. ETFs can also track sectors and industries, such as

Options Strategy: Sell Covered Calls on Technology Stocks

Stock prices of publicly traded technology companies have been resilient this year. Many remained unaffected or benefited from the onset of the current crisis. Other sectors seem more exposed to

Looking for Foreign Stocks with Powerful Dividends? Look No More! (VYMI)

Declining yields on investment income products has let investors to hunt for high dividend yielding stocks to boost their income. One product that I have actively used and would like