Reducing the Risk of Outliving Your Money


What steps might help you sustain and grow your retirement savings?

Provided by Mark K. Lund
“What is your greatest retirement fear?” If you ask retirees that question, “outliving
my money” may likely be one of the top answers. Retirees and pre-retirees alike
share this anxiety. In a 2014 Wells Fargo/Gallup survey of more than 1,000 investors,
46% of respondents cited that very fear; 42% of the respondents to that poll were
making $90,000 a year or more.1

Retirees face greater “longevity risk” today. According to an analysis of Census
Bureau data by the Center for Retirement Research at Boston College, the average
retirement age in this country is 65 for men and 63 for women. Many of us will
probably live into our eighties and nineties; indeed, many of our parents have already
lived that long. In 2014 (the most recent year for which Census Bureau data is
available), over 72,000 Americans were centenarians, representing a 44% increase
since 2000.2,3

If your retirement lasts 20, 30, or even 40 years, how well do you think your
retirement savings will hold up?
What financial steps could you take in your
retirement to prevent those savings from eroding? As you think ahead, consider the
following possibilities and realities.

Realize that Social Security benefits might shrink in the future. Today, there are
three workers funding Social Security for every retiree. By federal estimates, there
will be only two workers funding Social Security for every retiree in 2030. That does
not bode well for the health of the program, especially since nearly one-fifth of
Americans will be 65 or older in 2030.4

Social Security’s trust fund is projected to run dry by 2034, and it is quite possible
Congress may intervene to rescue it before then.
Still, the strain on Social Security
will mount over the next 20 years as more and more baby boomers retire. With this in
mind, there’s no reason not to investigate other potential retirement income sources
now.3

Understand that you may need to work part-time in your sixties and seventies. The
income from part-time work can be an economic lifesaver for retirees. Suppose you
walk away from your career with $500,000 in retirement savings. In your first year of
retirement, you decide to withdraw 4% of that for income, or $20,000. At that
withdrawal rate, not even adjusting for inflation, that money will be gone in 21 years.
What if you worked part-time and earned $20,000-30,000 a year? If you can do that
for five or ten years, you effectively give your retirement savings five or ten more
years to last and grow.3

Retire with health insurance and prepare adequately for out-of-pocket costs.
Financially speaking, this may be the most frustrating part of retirement. We can
enroll in Medicare at age 65, but how do we handle the premiums for private health
insurance if we retire before then? Striving to work until you are eligible for Medicare
makes economic sense. So does building some kind of health care emergency fund for
out-of-pocket costs. According to data from Health Affairs, those costs approached
$16,000 a year in 2014 for Americans aged 65-84, and $35,000 a year for Americans
aged 85 or older.4

Many people may retire unaware of these financial factors. With luck and a
favorable investing climate, their retirement savings may last a long time. Luck is not
a plan, however, and hope is not a strategy. Those who are retiring unaware of these
factors may risk outliving their money.

Mark Lund is the author of The Effective Investor and provides 401k consulting for small
businesses and Investment Advisory Services for individuals. Advisory services offered through
Stonecreek Wealth Advisors, Inc. a Registered Investment Advisor firm in Utah. Call
801-545-0696 for more info.

Citations.

1 – usatoday.com/story/money/personalfinance/2014/09/24/investors-fear-outliving-retirement-savings/16095591/ [9/24/14] 2 – thestreet.com/story/13468811/1/here-rsquo-s-how-to-make-your-money-last-in-retirement.html [2/23/16] 3 – marketwatch.com/story/so-whos-going-to-pay-for-you-to-live-to-be-100-2016-02-17/ [2/17/16] 4 – thinkadvisor.com/2016/02/22/6-ways-to-prevent-going-broke-in-retirement [2/22/16] This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any
Federal tax penalty. All information is believed to be from reliable sources; however we make no representation as to its
completeness or accuracy. All economic and performance data is historical and not indicative of future results. Market indices
discussed are unmanaged. Investors cannot invest in unmanaged indices. The publisher is not engaged in rendering legal,
accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent
professional. This material was prepared by MarketingLibrary.Net Inc., for Mark Lund, Mark is known as The 401k Advisor,
Investor Coach, The Financial Advisor, The Financial Planner and author of The Effective Investor. Mark offers investment advisory
services through Stonecreek Wealth Advisors, Inc. an independent, fee-only, Registered Investment Advisor firm providing 401k
consulting for small businesses and financial Advisor services for professional athletes and individuals. Stonecreek is located in Salt
Lake City, Murray City, West Jordan City, Sandy City, Draper City, South Jordan City, Provo City, Orem City, Lehi City, Highland
City, Alpine City, and American Fork City in Utah.

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