The goal of every retiree or any individual planning retirement is to enjoy and do whatever they want without running out of money. Unfortunately, that’s the most challenging aspect of retirement planning, as you have no idea how long the money you have in your retirement account will last.
Since you can’t possibly determine how long you’ll live, it’s hard to ascertain the number of years to plan for retirement. But of course, some data gives the average life expectancy, which can help you get an idea of how large your retirement nest egg should be.
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How Many Years of Retirement Should You Plan For?
As mentioned above, it’s quite challenging to estimate the number of years an individual will live after retirement. According to J.P. Morgan and data showing the probability of men or women aged 65 and above living to specific ages, people in these age ranges have the following probabilities.
- A man who is 65 and above has a 79% chance of living until age 75, while a woman within the same age range has an 86% chance.
- The chances of living up to age 80 are 63% for men and 73% for females.
- There’s a 44% chance of a man to make it to age 85, compared to women at 58%.
- Making it to age 90 is 23% likely for men, while women have a slightly higher chance of 34%.
- Men have a 7% chance of reaching age 90, compared to 14% for women.
- There’s a 1% chance of a man celebrating his 100-year birthday, and 3% for women.
Since there’s a 25% chance that you may live up to age 90 (both men and women), it would be ideal to plan for 25 years in retirement (25 years after you retire at age 65).
This will affect your retirement planning for the following reasons.
- You’ll need to plan far ahead if you live to age 95 or above 100 years old.
- Consider the impact of inflation within the 25 years, as it might mean having to make higher withdrawals to meet your expenses.
- Inflation has eroded one-third of the value of Social Security, thereby reducing the purchasing power. So you may be more reliant on the savings in your retirement account.
To address these factors and prepare for 25 years or more of retirement, you need to adopt a safe withdrawal strategy. With the right approach, your money will last you for your entire lifetime, even if you become a centenarian.
There are several strategies you can adopt. You can withdraw 4% in your first year of retirement and increase the amount based on inflation annually.
How to Ensure Your Money Lasts
Choosing a withdrawal method when in retirement will help you better manage your available cash. However, deciding on the ideal method beforehand will clarify the amount you need to save. For instance, if you opt for the 4% rule, you can determine how much you need to save monthly or annually to meet up to 25 years or more of expenses.
If your annual expenses total $40,000, you need to have $1 million in your retirement account before retirement. So whether you have 5 or 20 years before you retire, take some time and research your options.
Picking a suitable withdrawal strategy is an essential part of your retirement planning. The best way to ensure you have enough for the rest of your life is to choose a withdrawal method and build your retirement account around that.
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Bio:
After entering the financial services industry in 1994, it was a desire to guide people towards their financial independence that drove Aaron to start Steele Capital Management in 2013. Armed with an extensive background in financial planning and commercial banking coupled with a sincere passion for helping people, Aaron has the expertise and affinity for serving the unique needs of those in transition. Clients benefit from his objective financial solutions and education aligned solely withhelping them pursue the most comfortable financial life possible.Born in Olympia, Washington, Aaron spent much of his childhood in Denver, Colorado. An area outside of Phoenix, Arizona, known as the East Valley, occupies a special place in Aaron’s heart. It is where he graduated from Arizona State University with a Bachelor of Science degree in Business Administration, started a family, and advanced his professional career.Having now returned to his hometown of Olympia, and with the days of coaching his sons football and baseball teams behind him, he now has time to pursue his civic passions. Aaron is proud to serve on the Board of Regents Leadership for Thurston County as the Secretary and Treasurer for the Morningside area. His past affiliations include the West Olympia Rotary and has served on various committees for organizations throughout his community.Aaron and his beautiful wife, Holly, a Registered Nurse, consider their greatest accomplishment having raised Thomas and Tate, their two intelligent and motivated sons. Their oldest son Tate is following in his father’s entrepreneurial footsteps and currently attends the Carson College of Business at Washington State University. Their beloved youngest son, Thomas, is a student at Olympia High School.Focused on helping veterans and their families navigate the maze of long-term care solutions, Aaron specializes in customized strategies to avoid the financial crisis that care related expenses can create. Experience has shown him that many seniors are not prepared for the economic transition that takes place as they reach an advanced age.With support from the American Academy of Benefit Planners – an organization with expertise and resources on the intricacies of government benefits – he helps clients close the gap between the cost of care and their income while protecting their assets from depletion.Aaron can help you and your family to create, preserve and protect your legacy.That’s making a difference.
Disclosure:
Disclosure:Investment advisory services are offered through BWM Advisory, LLC (BWM). BWM is registered as an Investment Advisor located in Scottsdale, Arizona, and only conducts business in states where it is properly licensed, notice filed, or is excluded from notice filing requirements. BWM does not accept or take responsibility for acting on time-sensitive instructions sent by email or other electronic means. Content shared or published through this medium is only intended for an audience in the States the Advisor is licensed in. If you are not the intended recipient, you are hereby notified that any dissemination, distribution, or copy of this transmission is strictly prohibited. If you receive this communication in error, please immediately notify the sender. The information included should not be considered investment advice. There are risks involved with investing which may include market fluctuation and possible loss of principal value. Carefully consider the risks and possible consequences involved prior to making an investment decision.Confidential Notice and Disclosure: Electronic mail sent over the internet is not secure and could be intercepted by a third party. For your protection, avoid sending confidential identifying information, such as account and social security numbers. Further, do not send time-sensitive, action-oriented messages, such as transaction orders, fund transfer instructions, or check stop payments, as it is our policy not to accept such items electronically. All e-mail sent to or from this address will be received or otherwise recorded by the sender’s corporate e-mail system and is subject to archival, monitoring or review by, and/or disclosure to, someone other than the recipient as permitted and required by the Securities and Exchange Commission. Please contact your advisor if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services. Additionally, if you change your address or fail to receive account statements from your account custodian, please contact our office at [email protected] or 800-779-4183.
