When I retire, how long should I plan for my money to last?
That's a great question, and one that more people should ask.
One answer might be: As long as you live.
Or maybe: As long as you or your spouse live.
Or how about: As long as you and/or your spouse need it. (I like that one.)
Any of those could be correct. But notice that we have not referred to life expectancy. Why? Because the actuaries say half of us will die before our life expectancy, and half of us will live longer than our life expectancy. Advisers who use life expectancy are building in a 50% chance that you will run out of money before you run out of time. If your income plan looks like that, your first step should be to get a new adviser. This is not rocket science, and a 50% chance of failure is something no adviser should overlook.
My recommendation, if you are in good health, is to plan to live longer than your life expectancy. How much longer? That's something you and your advisers will have to decide; but in my practice, I don't want people running out of money anytime. Like it or not, I want them to die with money left over. That seems a lot better than dying broke. Like I said, this is not rocket science.
But a long retirement costs money, and you have to do the best you can with what you've got. That's why we are reluctant to work with anyone who won't go through our income planning process. And we make it easy, because we don't charge for it.
Posted by C. Thomas Thames
About the Author: C. Thomas Thames is a Certified Financial Planner™ professional with offices in Folsom and Elk Grove, California. Tom holds an MBA degree from Santa Clara University and has over 40 years experience in the financial services industry. He also holds the Chartered Financial Consultant and Chartered Life Underwriter designations. Tom shares his thoughts and ideas at www.cthomasthames.com.