hgazette.com, Haverhill, MA

December 21, 2011

How to cope with the 'Threat of Longevity'


You can't predict how long you'll live. Nonetheless, you still need to consider longevity as a key factor in creating, and following, a long-term investment strategy.

And your projected lifespan may be longer than you had thought. Men who turned 65 in 2010 can expect to live another 18.6 years, while women who reached 65 that same year can anticipate another 20.7 years, according to the 2011 Social Security Trustees Report. And these figures are just averages. Depending on your health and family history of longevity, you could well spend two, or even three, decades in retirement.

Possibly because people are now realizing they may have to support themselves for far longer than earlier generations did, they seem to be growing increasingly concerned about running out of money in their later years. In fact, in a poll of people ages 44 to 75, sponsored by Allianz Life Insurance, 61 percent said they fear depleting their assets more than they fear dying.

So, if you're concerned about outliving your resources — or if you think that you may become one of those people — what steps should you take, both now and during your retirement? Here are a few ideas:

Keep investing. Put away as much money as you can afford for your retirement. Take advantage of tax-deferred accounts, such as your 401(k) and traditional IRA, or tax-free accounts, such as a Roth IRA. (Roth IRA earnings are tax-free provided you've had your account at least five years and you don't start taking withdrawals until you're at least 59 1/2.) And keep investing, year in and year out, despite the inevitable market volatility you'll encounter along the way.

Reassess your retirement age. If you enjoy your work, you might consider staying at your job a few years later than originally intended. Those extra years of income, not to mention extra contributions to your 401(k) and potentially bigger Social Security payouts, can make a big difference to your retirement lifestyle.

Delay taking Social Security. As the laws now stand, you can start taking Social Security as young as 62, but your monthly checks will be bigger when you reach your "full" retirement age. You'll get your biggest monthly Social Security checks if you wait until age 70, when they "max out," but many people feel that waiting that long may not be worth it, when weighing the lost years of any payments against the unknown variable of life expectancy.

Calculate your "withdrawal rate." Once you retire, it's essential that you know how much can withdraw each year from your investments without running out of money. Your withdrawal rate depends on a variety of factors, including your age, size of portfolio, risk tolerance and retirement lifestyle. A financial professional can help you calculate your initial withdrawal rate and adjust it as time goes on.

The possibility of outliving your resources is not a pleasant thought. But by taking the steps described above, as well as others, you can go a long way toward taking the fear out of longevity, leaving you free to fully enjoy an active retirement.

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Michael Quinn is a financial advisor with Edward Jones, 25 Railroad Square, Suite 201, Haverhill. You can reach him at 978-372-4853. To comment on this column, visit hgazette.com.