What happens if you live long?

Tina Haapala |

 I like income streams, especially guaranteed ones. In the Star Trek saga, Spock would often give the greeting of friendship, “Live Long and Prosper.” When last heard from on the series, he was 139 years old. His father Sarek, lived 202 years. That’s a lot of living long and prospering.

Unfortunately, unless you are also at least one-half Vulcan, you probably won’t last as long. But you will likely live longer than you expect. How long?

Perception: People in their 50s expect to live about 21 years after retirement.

Reality: With a married couple, the average life expectancy for the longest-living spouse is in their early 90s…and what if they are above-average? They’ll make it into their late 90s 25% of the time.

Do your retirement planning so that your money will last. And when you plan, make sure you use a reasonable life expectancy. After all, while running out of money won’t kill you, it won’t make you feel good either.

Imagine making this phone call to your child: “Your Mom and I weren’t anticipating living this long and didn’t make the preparations needed. We were hoping that you could help us, at least until we can figure something out.” As hard as that phone call might be for the kids to hear, it is devastating to be one saying it.

In several studies the most common method for determining the amount of savings needed for retirement by consumers (that’s you) is guessing. That’s right; most people who ‘know’ they have enough to retire know this by instinct. No calculator need touch their fingers, they need not input information into an online retirement calculator, and there is certainly no need to talk with a financial planner. They just know.

Don’t guess. To know how much you need to have saved, you need to know what it is going to cost to live in retirement, compare that to your retirement income, and come up with the amount that investments have to cover. --   Excerpt from Real World Investing by Gary Silverman, CFP®

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