The financial implications of a long life
According to the National Center for Health Statistics, people today can expect to live more than 30 years longer than they did a century ago. Individuals who reached age 65 in 1950 could expect to live an average of 14 years more, to age 79; now a 65-year-old might expect to live for roughly an additional 19 years.1
A long life can be a wonderful thing. But it does add a challenge to retirement planning prompting you to ask yourself: how long will my savings last?
Here are some strategies to consider that may help your savings last longer for you.
Ways to make retirement savings last
1. Determine a sustainable retirement withdrawal rate
A smart, conservative withdrawal plan can help. Working with a financial advisor to decide how much to withdraw, which accounts to take the money from, and when to do so can help secure a comfortable retirement for you and your spouse or partner, and help ensure your retirement income lasts as long as possible.
How much can you afford to withdraw from your savings each year will depend on your individual needs. Many retirees have an unrealistic idea of the amounts they can withdraw annually without running out of money. Aggressive withdrawals are generally unsustainable — especially when the markets are down.
2. Plan for health care expenses
The cost of health care in America is rising astronomically. Combined with longer lives and less insurance coverage, this presents a potentially huge expense for retirees. What can you do?
A good approach is to factor health care costs into your retirement expenses. The average couple age 65 with median prescription drug expenses needs to save $259,000 to have a 90% chance of having enough for health care expenses in retirement, according to the Employee Benefit Research Institute.2
By accounting for these expenses in your retirement plan, understanding your options for Medicare or other health care solutions, and/or securing long-term care insurance, you may be able to avoid tapping your other savings.
3. Prepare for the unexpected
While no one can predict the future, you can prepare by taking a few simple steps. For example, always keep enough cash to last six months easily accessible. With this cash reserve available, you may not have to deplete your main savings in the event of an emergency, or be required to liquidate longer-term investments.
Your Ameriprise financial advisor can help you develop a plan for making your savings last as long as possible, protecting your assets from health care expenses and preparing you for unexpected events with easily accessible savings accounts.
Editor’s Notes: We thank Joanne S. Reilly, CFP®, APMA®, CDFATM Financial Advisor, Joanne Reilly and Associates – a financial advisory practice of Ameriprise Financial Services, Inc. and an Ameriprise Platinum Financial Services® practice. Visit Reilly on her website at Joanne Reilly and Associates, on Facebook and on Linkedin.