Will You Outlive Your Retirement Savings?
When Social Security was founded in 1935, the average life expectancy was about 62 years. Today, it's close to 80 and rising, according to the U.S. Social Security Administration. That means many of us can expect to spend 20 years or more in retirement enjoying the fruits of our labors — if our retirement savings are in tune with the reality of rising life expectancies.
So how do you plan for a long and prosperous retirement?
Start saving early
Ideally, people can build a solid foundation for a long retirement is by starting early. Tucking away a share of your income from the moment you begin working, taking advantage of employer-sponsored retirement plans and investing for the long term are the cornerstones of a good retirement strategy.
Even saving a little now can make a big difference later. Participating in your company retirement plan may not impact your paycheck as much as you think. Use this calculator to see how what you save today can help grow the nest egg you’ll need later.
Options for older workers
If, despite your best efforts, your retirement savings don't look like they'll last, there are several options:
- Work longer.
- Work part-time after retirement.
- Adjust your lifestyle to meet your retirement income.
- Move into a smaller home or to an area of the country where the cost of living is less.
- Consider the equity in your home and talk to a professional about potential means for supplementing your income.
The benefits of long-term care insurance
As people live into their 80s and 90s, a large expense in late retirement can be nursing home or home health-care costs. Long-term care insurance is one way to help protect yourself from the increasingly high cost of such care, and it may help to protect your assets so they can be bequeathed to heirs or a favorite charity.
Long-term care insurance isn't right for everyone though. Seniors with limited assets and income may rely on Medicaid to cover nursing home expenses, and those in the upper-income brackets often can pay their own way.
Tackling the longevity risk
If your family has a history of living long and you're worried about outliving your money, consider these moves:
- Purchase an income annuity. Using a share of your retirement savings to purchase an immediate annuity will give you a guaranteed income stream for as long as you live.
- Delay collecting Social Security benefits. You can start collecting Social Security as early as age 62, but your payout will be permanently reduced. You can delay benefits as late as age 70, earning an increased payout for every year you wait.
- Be conservative in withdrawing from savings. To make sure your money lasts as long as you do, many experts recommend that you limit your annual withdrawal rate to about 4 percent of your retirement savings.
Take the next step...
Consider increasing your contributions toward retirement! Login to the retirement account at The Principal Retirement Service Center® to increase your contributions to the retirement plan.
While this communication may be used to promote or market a transaction or an idea that is discussed in the publication, it is intended to provide general information about the subject matter covered and is provided with the understanding that The Principal® is not rendering legal, accounting, or tax advice. It is not a marketed opinion and may not be used to avoid penalties under the Internal Revenue Code. You should consult with appropriate counsel or other advisors on all matters pertaining to legal, tax, or accounting obligations and requirements.
