Could you live on your re­tire­ment sav­ings for 23 years?

Houston Chronicle - - PERSONAL FINANCE - By Dayana Yochim

Pre­ci­sion isn’t al­ways pos­si­ble when it comes to re­tire­ment plan­ning. That doesn’t mean you have to wing it and hope your sav­ings don’t ex­pire be­fore you do.

Look­ing at the in­come, liv­ing ex­penses and life spans of to­day’s re­tirees can help you make the right fi­nan­cial moves so your golden years aren’t tar­nished by an un­ex­pected short­fall.

WHAT’S AN “AV­ER­AGE” RE­TIRE­MENT COST?

Gov­ern­ment and Gallup data re­veal a lot about what re­tire­ment is like for Amer­i­cans to­day.

It starts at age 61, even though many tell Gallup they planned to work longer. And based on some mor­bid math — the av­er­age re­main­ing life ex­pectancy of some­one who’s made it to their early 60s (23.3 years), ac­cord­ing to the Cen­ters for Dis­ease Con­trol and Pre­ven­tion — you should plan to be re­tired for at least a few decades.

Your mileage might vary based on things such as your work (ac­coun­tant ver­sus rodeo clown, for ex­am­ple), diet, fam­ily health his­tory and par­tic­i­pa­tion in ex­treme sports leagues.

The av­er­age bud­get for a re­tiree, ac­cord­ing to Bureau of La­bor Statis­tics data, pro­vides even more color on what to ex­pect when you’re ex­pect­ing to re­tire. Older house­holds, de­fined as ones headed by some­one 65 or older, spend $46,000 an­nu­ally, ver­sus the $57,000 av­er­age spent by all U.S. house­holds com­bined. The top three monthly ex­penses for those 65 and older are hous­ing ($1,322), health care ($500) and food ($484).

On av­er­age, about half of a re­tired house­hold’s in­come comes from So­cial Se­cu­rity and pri­vate and gov­ern­ment pen­sions, ac­cord­ing to the BLS, with per­sonal sav­ings and in­vest­ment and rental in­come pro­vid­ing 6.9 per­cent.

FIND OUT HOW LONG YOUR MONEY WILL LAST

An on­line re­tire­ment cal­cu­la­tor can project a more ac­cu­rate pic­ture of your re­tire­ment readi­ness. It will use your cur­rent sav­ing, spend­ing and in­vest­ment pro­file and some rules of thumb about his­tor­i­cal in­vest­ment re­turns, rea­son­able with­drawal rates and, yes, life ex­pectancy. (Most cal­cu­la­tors as­sume peo­ple will live into their 90s.)

What if the cal­cu­la­tor shows that at the rate you’re go­ing, you’ll out­live your re­tire­ment sav­ings? If you’re not re­tired, one of the best moves is post­pon­ing your re­tire­ment party. This strat­egy is es­pe­cially valu­able for those in their peak earn­ing years.

Be­sides re­duc­ing the num­ber of years you’ll need to live off your sav­ings, work­ing longer al­lows more time for your in­vest­ments to grow. Plus, the ad­di­tional time con­tribut­ing to So­cial Se­cu­rity could mean a big­ger ben­e­fits pay­check down the road. Ev­ery year you post­pone fil­ing for So­cial Se­cu­rity af­ter your full-ben­e­fit re­tire­ment age (66 or 67 for most peo­ple), your fu­ture monthly ben­e­fits check grows by as much as 8 per­cent per year un­til you turn 70.

HOW TO PAD YOUR PAY­CHECK IN RE­TIRE­MENT

If you’re re­tired and un-re­tir­ing or wait­ing to file for So­cial Se­cu­rity aren’t fea­si­ble, there are other ways to make up for the short­fall be­tween re­tire­ment in­come and ex­penses. • Lever­age your home. If you have sub­stan­tial eq­uity in your home, a re­verse mort­gage can turn this as­set into in­come. You’ll re­ceive a reg­u­lar check as long as you’re liv­ing in the house. When you exit the premises to move else­where or on to the great be­yond, the checks stop and your es­tate must re­pay the loan. • Shop for an im­me­di­ate an­nu­ity. Al­though an­nu­ities are com­plex in­stru­ments — they’re es­sen­tially in­vest­ments baked into an in­sur­ance pol­icy — pay­ing a lump sum up­front to get a guar­an­teed monthly pay­ment for life might pro­vide the in­come sta­bil­ity you need. • With­draw less money

dur­ing down years. A com­mon rule of thumb among fi­nan­cial pros is the 4 per­cent rule, which is based on re­search in all mar­ket con­di­tions that shows a re­tiree can with­draw that amount an­nu­ally from a port­fo­lio in­vested half in stocks and half in bonds with­out de­plet­ing their fi­nan­cial re­serves be­fore they die. If you can be flex­i­ble and with­draw less, for ex­am­ple, when mar­ket re­turns are lower than ex­pected or you have re­serves from pre­vi­ous years’ with­drawals, you can make your money last longer.

• Seek as­sis­tance. There are gov­ern­ment, non­profit and for­profit pro­grams that pro­vide ben­e­fits to strug­gling se­niors. The Na­tional Coun­cil on Ag­ing (NCOA.org) helps the 60-plus set nav­i­gate things such as Sup­ple­men­tal Se­cu­rity In­come, Med­i­caid, debt man­age­ment pro­grams and sub­si­dized hous­ing.

Jeff Chiu / As­so­ci­ated Press

Look­ing at the in­come, liv­ing ex­penses and life spans of to­day’s re­tirees can help you make the right fi­nan­cial moves so your golden years aren’t tar­nished by an un­ex­pected short­fall.

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