How long does your money need to last?
In the July issue of The Advocate, Jennifer Hatch reports in the finance column that:
The biggest unknown in your financial future isn’t the market’s performance, it’s how long you’re going to live.
Financial advisors have dubbed this the longevity risk. Thanks to advances in health care, the average life span has been extended and poses a new threat to Baby Boomers: outliving your money.
How much do you need to save by the time you retire? Fred Yager at ConsumerAffairs.com writes, ‘œThere are a lot of ‘˜guestimates’ but the low end number seems to be around $450,000. Anything lower than that and it becomes a real struggle. To live really comfortably, you need close to $1 million in savings.’
So how best can you predict your life expectancy? Hatch mentions a site called LivingTo100.com:
This free site can — by posing 40 questions about your habits and health history — predict your life expectancy, giving you a better sense of your post-career financial needs. I logged on, took the test, and learned that I can expect to live until the ripe age of 95. The site also provides advice on how, with a few changes (like flossing daily to lower my risk of heart disease), I can extend my life expectancy to 98!
Of interest to couples, a long-term relationship (married or not) can make a meaningful difference to your lifespan. A 21st-century catch-22 comes in the form of added years of life if I reduce weekly hours at work — but if I work less, how can I save more to pay for those extra years of retirement?
If you’re near retirement, most people should focus on preserving wealth and making it last. Create the proper balance between risk and potential reward and your investments will provide a steady stream of income throughout your golden years.
Have you ever considered how long you’ll be sticking around? Try the calculator and let us know what you learn about your lifespan.
Photo credit: stock.xchng.
Nina – this is such an interesting question. I don’t think I want to get old and decrepit. I prefer to stay young and foxy. But that’s not reality – I don’t believe in better living through plastic surgery.
Yikes! 103 years old. Maybe I should start drinking again and ease up on all that exercise and healthy eating. Might be easier than trying to make the money last that long. 🙂
Well, I’m with Carol — I’d rather take up a few new vices than plan for enough money to last me to 98. 🙂
I’m also a little skeptical of that calculator though, as almost everyone in my family has led a healthy lifestyle similar to mine and then died by their mid-80s. So the 98 doesn’t seem too realistic to me. Whenever I run through my long-term financial planning for retirement, I base it on living to age 90.