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7 Steps to Take Now to Prevent Outliving Your Savings During Retirement

December 03, 2021

People often think that popular retirement vehicles like 401ks and social security are enough for their retirement but unless you plan to face no unpredictable events, and know what interest rates and taxes will be for years to come, those retirement tools are not enough. Here are 7 tools and strategies to learn more about and implement NOW to help ensure you have enough to live a comfortable retirement AND have enough to tackle any unpredictable events that may occur in your lifetime.

I have searched for the original source but have not been able to find who is responsible for this quote.  I was emotionally struck when I first heard it, as it was directed to me personally.  “Conor, your 80 year old self is depending on the man you are today”.  For some this may not be that profound but for me, it spoke to my future vulnerability.  I imagined the care I take today with a fragile 80 year old man.  Whenever I am around anyone elderly, I pay close attention to make sure they are cared for and comfortable.  This wasn’t the context of the quote however, the context was financial.  Many of us will face the prospect of retirements that last 30-40 years!  Will those years be filled with joy and peace or strife and struggle?  Your 80 year old self is depending on the person you are today!  So what steps might you take today?

  1. Take stock of where you are right now. 

    • As humans we have an amazing ability to mask, deny, and sugar coat our present and future.  Rose colored glasses will not secure your financial future.  The great news is, wherever you are is the exact position you should be in to take!  A very rough formula I use to determine the amount of money a 65 year old may need to create a certain income is to simply use a calculator to divide your desired income by 4.75%.  So for example, if someone desires to create $50,000 per year of income at age 65 they would punch in 50,000 divided by .0475.  They should come up with $1,052,631.  This is far from an exact science but this formula identifies that if you are 65, you need over $1,000,000 to create an annual income of $50,000.  
  2. Automate your savings. 

    • Over the past 20 years, I have yet to find a better way to save that doesn’t involve automation.  We are creatures of habit.  It is very difficult to change our good habits and our bad habits.  When working with clients, it is amazing how often I hear, I forgot about that.  Or I forgot that I had that.  This is exactly where you want to be.  In my opinion the best financial planning is planning that almost goes unnoticed.  I teach and personally believe that you should spend and enjoy your life today while responsibly planning to continue to enjoy your life in the future.  Many clients don’t have a vision for how to accomplish this.  They view savings as a form of suffering.  I don’t want you to pass on that Starbucks.  I don’t want you to miss out on that vacation to Italy.  With that said, a real reworking of your balance sheet and savings structure may be in order.  
  3. Examine your access to retirement plans. 

    • Do you have a 401(k) or other retirement plan through an employer?  What is the match?  Do you have a Roth 401(k) option?  Should you defer taxation or pay your taxes today?  These are all things you are going to want to have answers to.  The answers should guide the amount and form of funding directed toward these types of plans.  
  4. How is your health?

    • One of the greatest exponentially growing costs we face in the future is the cost of health care.  I believe we will either pay now or pay later and I like the cost and benefits of paying today.  Have you ever looked at the health benefits surrounding a simple walk every day?  Many of us are desiring a beach body, we may feel that a 30 minute walk once a day is not going to do anything for us.  This is not the game I am speaking of or playing personally.  The game I am playing is living a healthful, disease free, mobile life to age 100.  What if that was the game you were playing?  According to the Hamilton Project, a woman 65 years old in 2015 has a 34% chance of making it to age 90.  A man 65 years old in 2015 has a 22% chance of making it to age 90.  One of the greatest expenses for the elderly is health care.  That daily walk may just be worth hundreds of thousands of dollars if not millions!
  5. How is your job satisfaction?

    • One of the greatest retirement plans I have ever devised is not to retire!  It is amazing the disparity you will see surrounding the job satisfaction of my clients.  Those who love what they do often say things like, “I may work less hours, I may restructure my schedule, but I don’t believe I will completely stop working”.  On the other hand, clients who hate their work often quote me the exact amount of days or years they have left.  We are experiencing one of the greatest labor shortages in history.  If you hate what you do, maybe it is time to explore other opportunities that are sustainable into your retirement years.  
  6. Have you examined the potential benefits of Annuities?

    • Annuities are one of the few financial vehicles that can guarantee a lifetime of income.  They can guarantee that you do not outlive your money.  With that said, there are many different flavors of annuities.  Working with a Financial Advisor who is willing to look at your entire financial picture, while taking the time to educate you on the costs and restrictions vs. benefits in your particular situation is extremely important.  I have noticed that annuities often get a bad wrap among my clients and potential clients.  These can be complex financial instruments so taking the time to make sure you understand them and that they in fact are the best tool for a particular job is very important.  It is my opinion that a conversation surrounding “not outliving your money” would be incomplete without having this conversation
  7. Do you fully understand the benefits of life insurance?  

    • When many people think about life insurance, they immediately go to a morbid place.  After all, at a base level, life insurance is designed to pay out a benefit at the death of an insured.  I am hopeful that the following idea will turn the conversation of life insurance into a positive one.  I have noticed that as my clients age, they tend to get more concerned about spending their investments for fear of running out.  When appropriate many of my clients purchase a death benefit in their 50’s and 60’s as part of their retirement strategy.  Retirement strategy?  Think about it, statistically it is unlikely that you and your spouse will die on the same day.  Meaning, one of you will go first.  When each couple has a death benefit, it often can relieve stress surrounding the spending and enjoyment of their retirement assets.  Knowing that a tax-free death benefit will come in regardless of who passes first, gives an extra piece of mind and nudge to enjoy what you both have saved, while securing your and your spouses later years with this tax-free death benefit.  

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The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. Conor Boyd is a Registered Representative and Investment Adviser Representative of Equity Services, Inc.  Securities, Financial Planning, and Investment Advisory Services are offered solely by Equity Services, Inc., Member FINRA/SIPC, 333 Westchester Avenue, South Building Suite 3302, White Plains, NY 10604 914.428.4000.  Thoroughbred Advisors, LLC is independent of Equity Services, Inc. TC123841(1121)1