Simply Money

Simply Money

Each weeknight at 6pm, Simply Money makes money simple for you. Join hosts Amy Wagner and Steve Sprovach as they share easy-to-understand and...Full Bio


Will I Outlive My Money?

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


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 Simply Money, 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 an advisor.

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