Reducing the Risk of Outliving Your Money What steps might help you sustain and grow
your retirement savings? “What is your greatest retirement fear?” If you ask any group of retirees and pre-retirees
this question, “outliving my money” will likely be one of the top answers. In fact, 51% of investors surveyed for a 2019
AIG retirement study ranked outliving their money as their top anxiety. Retirees face greater “longevity risk”
today. The Census Bureau says that Americans typically
retire around age 63. Social Security projects that today’s 63-year-olds
will live into their mid-eighties, on average. This is a mean life expectancy, so while some
of these seniors may pass away earlier, others may live past 90 or 100. 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 try and 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. For decades, Social Security typically took
in more dollars per year than it paid out. That ongoing surplus – also known as the
Social Security Trust Fund – is now projected to dry up by 2035. Congress may act to address this financing
issue before then, but the worry is that future retirees could get slightly less back from
Social Security than they put in. It may be smart to investigate other potential
retirement income sources now. 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. What if you worked part time and earned $20,000
to $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. Retire with health insurance and prepare adequately
for out-of-pocket costs. Financially speaking, this may be the most
frustrating part of retirement. You can enroll in Medicare at age 65, but
how do you handle the premiums for private health insurance if you retire before then? Striving to work until you are eligible for
Medicare makes economic sense and so does building a personal health care account. According to Fidelity research, a typical
65-year-old couple retiring today will face out-of-pocket health care costs approaching
$300,000 over the rest of their lives. 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.