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Are You at Risk of Outliving Your Money?

Are You at Risk of Outliving Your Money?

July 07, 2022

The possibility that you may outlive your money is a reality we have to face currently. The good news is that people are living healthier lifestyles today, which means life expectancy is increasing. Currently, theaverage life expectancy of men is 84 years and 86.5 years for women. Also, the projection is that many people will live past this average age.

The not-so-good news is that this life longevity comes with a new challenging reality. AWorld Economic Forum report suggests that the average American is expected to run out of savings at some point during retirement.

The current projections are that most retirees may likely outlive their savings by 8-10 years based on the current life expectancy. Here is how you can avoid the risk of outliving your retirement savings.

Plan for a Bigger Retirement Saving than You may Need

Setting your retirement saving targets may be a challenge to many. One rule of the thumb in setting retirement saving targets is ensuring they are 80% of your working income. Does it sound like much?

No, it is not. There are so many factors you cannot control later. For example, you may live for many years past your life expectancy. Or the possibility of increased expenses resulting from higher healthcare costs.

You can never be too careful when determining your retirement saving targets. But how can you be sure of how much is enough? TheWheeler Wealth Formula can help you solve this mystery!

The formula takes into account all the factors that may impact your retirement savings. That helps you make more accurate estimations of your retirement savings amount.

Invest for Inflation

The rising inflation cost is one of the current realities we face. The current inflation crisis will not extend into your retirement, but inflation will always be there. It may not be as high, but it will be there.

That makes it an essential factor in your retirement planning. You can be sure that the cost of commodities will continue to rise through your years of retirement. When determining how much to save for retirement, you need to factor in how to cover the inflation costs.

The inflation factor is well taken into account in the Wheeler Wealth Formula. You can check it to determine how much you will need to save for retirement.

Don’t Quit Just Yet

Our discussion today started with some positive news. The life expectancy of American adults is increasing as people live healthier lifestyles. You can take this news positively to increase your retirement savings.

If your retirement savings need boosting, you can do so by delaying your retirement. Working a couple more years helps you increase your retirement savings amount. Currently, many firms are allowing their employees to extend their retirement age.

On the other hand, delaying your retirement means you don’t have to start dipping into your retirement savings early. And this delay has its benefits. For example, there is an 8% boost in benefits for every year you delay taking your social security after full retirement age up to the age of 70.

Invest Your Retirement Savings in Tax-Advantaged Accounts

Take time to understand the tax implications of various investment vehicles you choose. Taxes impact the total amount of money you will have in your retirement savings account.

For example, the traditional 401(k) and IRA allow you to invest pre-tax money now that you will be taxed when making withdrawals in your retirement. However, the Roth 401(k) and IRA allow you to invest money that has already been taxed. You will not pay any taxes when withdrawing during your retirement.

Again when you factor in the issue of inflation, the Roth 401(k) and IRA look like the safer bet for your retirement savings. It allows you to enjoy your retirement savings without worrying about what you are sharing with Uncle Sam.

Avoid Withdrawing from Your Retirement Savings

There is a reason the account is named the retirement savings account. It is supposed to cater to your needs during retirement. Withdrawing from the account before retirement translates to robbing your retirement. 

When you start spending your retirement before retiring, there is a high likelihood that there may be little left after retirement. It also increases your risk of outliving your retirement.

What you need is to develop better financial plans. For example, having a side hustle will help supplement your income and avoid the possibility of withdrawing from your retirement fund.

How to Further Eliminate the Risk of Outliving Your Money

There are no shortcuts to eliminating the risk of outliving your money. You have to come up with a solid plan retirement savings plan.

Be sure to tune in to the latestWheeler Wealth Podcast to learn how you can avoid the risk of outliving your money. The discussion focuses on the mistakes you have been making with your retirement savings and how you can make them right.