Americans are living longer than ever, thanks to advances in health care, improved diets and better exercise. About one out of every four 65-year-olds today will live past age 90, and one out of 10 will live past age 95, according to data from the Social Security Administration.
This is great news of course. But it also presents you with a significant financial challenge: making sure your money lasts as long as you do. The possibility of running out of money is one of the biggest risks many retirees will face in the years ahead.
Your spending habits
Don’t assume that your expenses will decline significantly once you leave the workforce. Retirees today and in the future are likely to be much more active than previous generations and will pursue lifestyles that require more money. True, some expenses may decrease; you may, for instance, downgrade to a smaller home. But others – such as travel and leisure, healthcare and prescriptions—will almost certainly increase.
A longer retirement gives inflation more time to erode your purchasing power. Conventional wisdom is to become less aggressive with your investments as you near retirement. The problem is that bonds and other fixed-income investments may not keep up with inflation. This means you’ll probably want to start your post-career life with a healthier allocation in growth-oriented investments such as stocks. Stocks have had a better track record outpacing inflation than other forms of securities, although they also carry greater risk and volatility.
Your withdrawal strategy
The amount of money you withdraw from your portfolio each year in retirement will have a big impact on whether your savings can go the distance. Withdrawal percentages per year that were historically deemed “safe” may not cover today’s living expenses and can significantly boost the risk that you may run out of money during retirement. To help generate a steady stream of income for a period of years or over your entire lifetime, consider annuitizing a portion of your portfolio to cover necessities. An annuity can be your own guaranteed account to cover the necessities in life.
Your health care costs
An extended retirement may mean a greater need for specialized medical care down the road—and with fewer employers offering lifelong health insurance, the burden will fall largely on individuals. Therefore, your plan also should set aside some assets to pay for long-term care. The national average for full-time long-term care services in a semi-private room is $92,710 annually—an amount that can quickly deplete a retirement portfolio. That makes it imperative to plan for unforeseen medical and health care problems before they occur.
If you review your situation and discover that you’re not as well prepared as you’d hoped, don’t panic. There are plenty of smart moves you can make to get on track. You might consider looking for ways to build up your retirement savings—for example, by saving more or investing any bonus or inheritance you receive.
Another option is to increase your investment allocation to stocks and high-yielding fixed income instruments if you can handle the risk or vehicles that will help to ensure a lifelong income stream. An additional alternative is to join the growing number of Americans who are choosing to delay retirement or work part time in retirement to generate additional income. In short, you have options.
By giving yourself as much time as you can to implement a comprehensive financial plan—and to review it along the way—you’ll increase your chances of achieving a comfortable and secure retirement and living the life you’ve dreamed of for decades to come.
Feel free to reach out to us if you need financial guidance. At Krietzberg Wealth Management, we are here for you to help you realize your dreams.
 United States Social Security Administration, Benefits Planner | Life Expectancy, SSA.gov.
 What Care Costs, Lincoln Financial Group
The content of this material was provided to you Lincoln Financial Advisors for its representatives and their clients. This article may be picked up by other publications under financial professional’s bylines. Curtis Krietzberg and David Krietzberg are registered representatives of Lincoln Financial Advisors Corp. Securities and investment advisory services offered through Lincoln Financial Advisors Corp., a broker/dealer (member SIPC) and registered investment advisor. Insurance offered through Lincoln affiliates and other fine companies. It is not our position to offer legal or tax advice. Krietzberg Wealth Management is not an affiliate of Lincoln Financial Advisors.