Avoid Outliving Your Money

Brian Watson, CFP

One of the most important planning issues faced today is how to prevent outliving your money. If you currently are living off of income from investments, this relates to you. The problem lies in the fact that, as people continue to live longer and longer, their annual inflation-adjusted withdrawals from a retirement portfolio may at some point bankrupt the account. This is the equivalent of a financial crash and burn.

The only way to gain insight into your own situation is to get some retirement projections done using actual information from your specific situation. The ways to prevent running out of money include withdrawing an amount of money from your investments that will be sustainable over a long period of time. A 65 year old should not feel very comfortable if projections show they are going to run out of money at 75. Another variable is having the appropriate asset allocation. For example, a 65 year old may live 20 or even 30 years. Being too conservative with your investments can actually increase the likelihood of running out of money. Another idea is to use immediate or variable annuities for some of your income needs. These products can provide an income stream you won't outlive. 

The biggest thing everyone must do is to regularly review your situation. Year by year, make sure that you continue to update your strategy to avoid any "surprises" that may be too dire to recover from. 

Prosperity Partners, Inc.
www.prosperitypartners.com
800-868-6230
JasonR@ppicash.com