If you live to 100, can you avoid
outliving your money?
Provided by Benjamin Bogetto
Will you live to 100? Your odds of becoming a centenarian may be improving.
Earlier this year, the Centers for Disease Control reported that the population
of Americans aged 100 or older rose 44% between 2000-2014. The Pew Research
Center says that the world had more than four times as many centenarians in
2015 as it did in 1990.1,2
If you do live to 100, will your money
last as long as you do? What
financial steps may help you maintain your retirement savings and income? Consider
these ideas.
Keep investing in equities. The S&P 500 does not automatically gain 10% or
more each year, but it certainly has the potential to do so in any year. As the
benchmark interest rate is still well below 1%, fixed-rate investments are not
producing anything close to double-digit returns. Some fixed-rate vehicles are
even failing to keep up with the current inflation rate (1.5%). Turning away
from equity investments in retirement may seriously hinder the growth of your
savings and your level of income.3
Arrange
some kind of pension-like income. If you can retire with a pension, great; if not,
you may want other income streams besides Social Security and distributions
from investment accounts. Renting out some property may provide it; although,
the cost of third-party management can cut into your revenue. Dividends can
function like a passive income stream, albeit a highly variable one. Even
creating online content may provide residual income.
Hold off
filing for Social Security. If you are in reasonably good health and think you may live into your
90s or beyond – and that could prove true for you – then retiring later and
claiming Social Security later can make great financial sense. If you wait to
claim your benefits at Full Retirement Age (which will range from 66 to 67,
depending on your birthdate), you will have fewer years of retirement to fund
than if you left work at 62 and claimed benefits immediately. By continuing to
work, you are also allowing your retirement savings a few more years to
potentially grow and compound when they are at their greatest – so this might
be the wisest step of all.
If your
savings are large enough, you could try living only off the interest. If your invested assets
equal $1 million and your investments return 5% in a year, could you live on
that $50,000 plus Social Security or your pension in the succeeding year? You
may be able to do that, perhaps easily depending on where you choose to live in
retirement. You would not be able to do that every year, of course – you would
have to dip into your principal if your portfolio returned almost nothing or
took a loss. For every year you manage to live off the equivalent of your
investment returns, however, your principal goes untouched.
Funding 35
or 40 years of retirement will be a major financial challenge. The earlier you plan and
invest to meet that challenge, the better.
This material was prepared by MarketingPro, Inc., and does not
necessarily represent the views of the presenting party, nor their affiliates. This
information has been derived from sources believed to be accurate. Please note
- investing involves risk, and past performance is no guarantee of future
results. 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 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. This is neither a solicitation nor
recommendation to purchase or sell any investment or insurance product or
service, and should not be relied upon as such. All indices are unmanaged and
are not illustrative of any particular investment.
Securities offered through First Heartland Capital, Inc. Member FINRA/SIPC
Bogetto Financial is not affiliated with First Heartland Capital, Inc.
Bogetto &Associates does not provide legal or tax advice. These topics are discussed in conjunction with your CPA, Tax Advisor and Attorney.
Citations.
1 - money.usnews.com/money/blogs/planning-to-retire/articles/2016-01-22/how-to-finance-living-until-100 [1/22/16]
2 - pewresearch.org/fact-tank/2016/04/21/worlds-centenarian-population-projected-to-grow-eightfold-by-2050/ [4/21/16]
3 - tradingeconomics.com/united-states/inflation-cpi [10/20/16]
Financial Health...For Now & Tomorrow
Contact us Today
Website - www.bogettoandassociates.com
Telephone - 314-858-1602
Email - peter@bogettoandassociates.com
10805 Sunset Office Drive, Ste. 202
St Louis, MO 63127
Website - www.bogettoandassociates.com
Telephone - 314-858-1602
Email - peter@bogettoandassociates.com
10805 Sunset Office Drive, Ste. 202
St Louis, MO 63127
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