The most important retirement income question is the one that no one can answer: How long does your income need to last? A successful retirement income strategy ensures your assets will last over your lifetime. But will that be for 20 years after you retire? For 30 or 40?
Underestimating life expectancy can lead to a miscalculation of the financial resources needed for retirement.
Longevity risk is perhaps the biggest risk to a financially secure retirement.
It’s the risk that you’ ll live longer than you expected, and won’t have the resources to support yourself in the later stages of your life.
The length of your retirement affects every facet of your retirement income strategy – how you should invest, protecting your savings from inflation, how much you can safely withdraw, and everything else.
What the numbers say
How long can you realistically expect to live after you retire? With advances in medicine and other factors, retirements of 25 or 30 years are becoming commonplace. A financial strategy that projects out to age 85 or 90 may not be adequate.
Common Considerations
- When creating a retirement income strategy, add at least 10 years to projections of life expectancy to minimize the risk of underestimating your needs.
- Build retirement assets well in advance of your intended retirement date. It’s common for people to stop working earlier than expected. An illness, merger or reorganization can lead to an earlier than expected retirement date.
- Get an independent perspective. A financial advisor can help you evaluate whether you’re on track, and has the expertise to help you achieve your goals.
Reducing the risk of running out of money
You can’t predict how long you’ll live. But you can reduce the risk of outliving your savings. Here are some steps you can take.
- Review your family history. It may be an indication of your own future – so prepare accordingly. Keep in mind that people now commonly live longer than their parents or grandparents.
- Assess whether your retirement income is guaranteed for life. This may include pension plan benefits or annuities. It’s even better if the income adjusts with inflation to help you preserve purchasing power as you age.
- Boost your retirement savings. Saving for retirement is a key goal prior to retirement but it doesn’t have to stop there. Dollars that went to fund college tuition or other expenses can be re-directed to help lift savings during your “stretch run” to retirement.
- Expect the unexpected. The future rarely goes according to plan. Retirement can come earlier than expected, expenses can appear from nowhere and life can change in unanticipated ways. A bigger retirement savings cushion puts you in a better position to adapt to the unexpected.
With a sound strategy, your advisor can help you prepare for retirement income for the long run.
All guarantees are subject to the financial strength and claims paying ability of the issuing insurance company. Securities and Investment Advisory services offered through Securian Financial Services Inc. member FINRA/SIPC. Tax and Financial Group is independently owned and operated. 5624141 DOFU 4/2023
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Securities offered through Cetera Advisor Networks LLC (doing insurance business in CA as CFGAN Insurance Agency LLC, CA Insurance Lic# 0644976), member FINRA/SIPC. Advisory Services offered through Cetera Investment Advisers LLC, a registered investment adviser. Tax & Financial Group is independent of Cetera. 4001 MacArthur Blvd., 3rd Floor, Newport Beach, CA 92660. For a comprehensive review of your personal situation, always consult with a tax or legal advisor. Neither Cetera Advisor Networks LLC nor any of its representatives may give legal or tax advice.
This site is published for residents of the United States only. Registered Representatives of Cetera Advisor Networks LLC may only conduct business with residents of the states and/or jurisdictions in which they are properly registered. Not all of the products and services referenced on this site may be available in every state and through every representative listed. For additional information please contact the representative(s) listed on the site, or visit Cetera Advisor Networks LLC site at www.ceteraadvisornetworks.com. Individuals affiliated with this broker/dealer firm are either Registered Representatives who offer only brokerage services and receive transaction-based compensation (commissions), Investment Adviser Representatives who offer only investment advisory services and receive fees based on assets, or both Registered Representatives and Investment Adviser Representatives, who can offer both types of services. Please note: The charitable entities and/or fundraising opportunities described herein are not endorsed by, or affiliated with Cetera Advisor Networks or its affiliates. Our philanthropic interests are personal to us and are not reviewed, sponsored, or approved by Cetera.