How Long Will My Retirement Savings Last?

As you plan for your future retirement, life expectancy is a critical component that you need to consider. As overall lifespan continues to increase, you must strategically plan your finances so that you can enjoy and take advantage of your golden years.

How long will my retirement savings last?

Life Expectancy and its Impact on Investing

As you plan for your future retirement, life expectancy is a critical component that you need to consider. As overall lifespan continues to increase, you must strategically plan your finances so that you can enjoy and take advantage of your golden years.

What are your investment anticipated future values? Have you researched past performance of your investment portfolios? What is the expected inflation rate when you are planning on retiring? Have you decided to do high-risk investments or those that carry significantly lower risk in the long run? Do you count expected inheritances?

All of these questions must be answered with a longer life expectancy in mind. Your current retirement income plan may not hold up to inflation rates and your longer life expectancy. Consider your other lifetime income sources. Also think about your current financial institution, investment companies, and if you are seeing a financial advisor. A financial advisor can help you determine your estimated net worth. This is an important figure for retirement planning.

The Average Life Expectancy is Longer Than You May Think

You may be asking yourself, how long will my retirement savings last? With an abundance of new medical and technological advances, life expectancy is increasing. For example, according to the Bureau of Labor Statistics, the average life expectancy in America in 1850 was around 40 years. Today, life expectancy has almost doubled and will continue to rise. This means that you will need to increase your long-term investments and pad your savings accounts more than previous generations.

Here are some reasons why life expectancy has risen and will continue to do so:

Modern medicine

Medical discoveries and immunizations have decreased or eradicated many deadly diseases. Antibiotics like penicillin and vaccines preventing polio, measles, etc. have helped to increase life expectancy. Preventative medicine and improved health screenings keep people healthier. 21st-century pharmaceuticals, advancements in surgeries, and expert medical practice enable us to live longer.

Improvements in mobility

Loss of mobility is a major factor when considering life expectancy. New technologies enable greater mobility so that we can live healthier, more active, and longer lives.

Innovation profit motive

Innovation fuels innovation. Healthcare and technology are continually evolving and there’s a huge demand in these markets. This incentivizes workers and companies to develop new ways to extend life expectancy through healthcare and technological advances.

According to World Bank, the average life expectancy in 2015 was 78.74 years and 81.3 years for American men and women respectively. The link below shows total life expectancies for Americans, based on current age. It is worth noting that half of the people in each bracket are expected to live longer because of these projections and ongoing medical advancements.

Factors such as current health and heredity can also cause individual life expectancies to vary widely.

The bottom line is that you should prepare to live a long time and save enough money to maintain your lifestyle.

Average Life Expectancy

Source: 2009 U.S. Total Population Life Table (revised 01/06/2014), National Vital Statistics Reports, Volume 62, Number 7. Life expectancy rounded to the nearest year.

Many Seniors Have Not Prepared to Live Long Lives

The same recurring question goes through every senior's mind, "how long will my retirement savings last?" Today’s aging baby boomers are reaching retirement age in record numbers and many have not saved enough for retirement, with many suffering from personal finance issues due to underestimate living expenses. This is putting America in debt”by draining funds such as Social Security, Medicare and Medicaid.

Diligently planning your retirement income with investment time horizon and life expectancy in mind can help you predict the funds needed to last your lifetime. If you err on the longer side of your lifespan projection, you’ll be able to afford to retire when you want and live with the comforts you desire as you age.

Withdrawal advice to make your retirement savings last

Of course, your actual sustainable withdrawal rate will vary depending on a variety of variables beyond your control, including how long you live and inflation adjusted withdrawals, as well as the long-term risk and return of the markets.

The current market environment around the retirement date may be particularly crucial, according to history, since a weak market early in retirement can severely reduce your nest egg, especially if you don't slow down your withdrawals as the markets fall. A robust stock market, on the other hand, can offer financial wind under your wings for decades.

Another important consideration is the mix of investments you select. The historical record shows that portfolios with more stocks offer better long-term growth, but they also have larger price swings. Choosing the correct withdrawal rate might boost your chances of success, but it won't guarantee that you won't run out of cash. Annuities, for example, provide that assurance. While investing is inherently risky, some insurance products promise a regular payment until death to eliminate the risk of outliving one's savings.

The bottomline on withdrawals

For many seniors, preparing for retirement withdrawals might be difficult. And it makes sense, given the numerous uncertainties, including how long you will live and the market's performance. Our guideline is only a starting point; each person must evaluate their own circumstances and prospects when determining how much they can comfortably spend in retirement.

Plan Beyond Your Life Expectancy

Most retirement planners recommend that you plan for a longer retirement and have a larger retirement savings account than you think you need. Calculate your life expectancy, then add anywhere from 5 to 10 years just to be safe. Many financial calculators automatically use life expectancy figures higher than those used by the Social Security Administration. Some advise investors to plan to live to the age of 92, 95 or even 100.

Why Investment Time Horizon Is So Important

A bigger allocation of equities in your financial benchmark is necessary for longer time horizons. Time horizon forecasting is key and should be considered along with other factors such as return expectations, investment funds, average annual compounded rate, tax advice, cumulative savings, and cash flow needs. Setting financial goals to meet a longer time horizon and life expectancy will provide peace of mind and improved quality of life in retirement. Connect with qualified professionals, like a financial advisor today to get the help you need to prepare for your post-work life.

Don't be a senior asking yourself, "how long will my retirement last?"

When you're approaching retirement, you may wonder how far your current savings will get you. However, if you're still a few years from retiring, calculating how changes in your savings rate will affect how much money you'll have when you retire is an excellent method to assess how they might impact your retirement plans. Seek personalized advice to help you prepare.