Can Your Portfolio Withstand a Long Retirement?

Posted on: December 7th, 2017

More and more Americans are living to be over 100. In fact, the number of centenarians in the United States is projected to grow from 72,000 to 600,000 by 2060.* With so many people predicted to live well past retirement age, should you expect to as well? It’s important to understand the implications for your retirement plans. Could your retirement portfolio withstand 30 or more years of distributions and the effects of inflation? Learn how to handle these questions and make educated guesses about your future.

Estimate Your Longevity

According to the Social Security Administration (SSA), men who are 65 today are projected to live, on average, until they are 84 years old, while the average life expectancy for women who are 65 today is 86. To find the average life expectancy for your birthday and gender, the SSA has a life expectancy calculator on its website.

You can tailor your result from the calculator to be more accurate for your individual circumstances. If you have a condition such as cancer, diabetes, heart disease, respiratory disease or vascular disease, it will negatively impact your life expectancy. Your occupation also matters, as more dangerous lines of work can bring down your life expectancy while jobs with access to good health care plans can improve it. And in general, the more you earn, the longer your life expectancy. Once you consider all the factors that can affect your longevity, you can estimate how long your retirement savings need to last.

Fight Back Against Inflation

Inflation can dramatically affect your retirement savings. Over the past 10 years, inflation (as experienced by consumers for day-to-day living expenses) has risen an average of about 1.9 percent each year.** That doesn’t sound like a lot until you plug in some real numbers. If you plan to live on $80,000 a year in retirement, your purchasing power will only be about $40,000 after 35 years of 1.9 percent inflation. And although the monthly rate of inflation hasn’t been higher than 5 percent since 1991, long-term rates of inflation can be difficult to predict, making it important to prepare for higher inflation scenarios.

Adjust As You Go

To withstand inflation’s erosion of your buying power, evaluate your retirement portfolio for its inflation-fighting potential. Typically as you near retirement, it’s wise to take a more conservative stance because you have less time to balance out market downturns. However, a longer life span means more time to ride out market waves, so be careful not to limit your growth potential too early.

Learn strategies for keeping pace with inflation by scheduling a consultation with your Seaside Client Advisor who will help you work toward your retirement goals.

* Source: United States Census Bureau.

** Source: Bureau of Labor Statistics.

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