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Guarding Your Wealth for Senior Citizens
What is a Retirement Paycheck You Can Depend On?
You need to depend on
your money lasting far beyond age 85
By Jeffrey D. Voudrie, CFP
 November 9, 2006 - Financial retirement was very
different for our parents. They worked for the same company for most of
their careers. When they retired, they started receiving monthly checks
from their company pensions. Nowadays, financing retirement is much more
complicated. But it doesn’t have to be. Read on to find out how.
There are two issues that must be dealt with so you
can have the freedom in retirement to focus on living instead of
constantly worrying about your investments. The first issue is how much
money you can receive on a monthly basis. The second issue is how long
you will live.
These issues are inter-related. Very few people
have an endless supply of money. Most have a nest egg that they’ve
accumulated over time. The nest egg includes money from a 401(k), the
lump-sum from the company pension and other monies that have been set
aside.
Wouldn’t it be nice to know that you will receive a
‘paycheck’ each month in your retirement and that the amount of your
‘pay’ can increase each year? Better yet, what if that could be done in
such a way that your nest egg continues to grow in value?
I believe that we need to re-think the way we
invest during retirement. Let’s face it: the size of a retiree’s nest
egg isn’t what it needs to be if you can only get paid 4%. I regularly
talk to retirees that need to withdraw 6-7% a year. Traditionally, doing
that would result in depleting the nest egg by age 80-85 or sooner. That
won’t cut it.
Life expectancy continues to increase so you need
to be able to depend on your money lasting far beyond age 85. If you
retire at age 60, it’s becoming much more likely that you will live 30
or even 50 years. That’s places a lot of pressure on your nest egg!
According to the Urban Futures Institute, “The big
killers of the pre-World War II years…all had disappeared from the
leading causes of death…by the 1980’s.” The main causes of death
nowadays are cancers and cardiovascular disease. There are billions of
dollars being invested in research each year trying to find ways to
prevent or cure both.
Researchers are finding that current death rates
for those over age 95 are far less than what had been predicted.
Previously, it was anticipated that the death rate would continue to
climb as one got older. What’s taking place, though, is that the death
rate for those who live to age 95 actually drops off.
It’s not uncommon to see people live to be 100 or
105 or 110. Keep in mind that those age 100 lived most of their lives
before many of the major medical advances occurred. In general, people
retiring today are in much better health than their parents were at age
60.
It’s vital that your nest egg last longer than you
do. The only way for that to occur is if the nest egg continues to grow
over time. If you continue to take out more than you earn you are
guaranteed to run out of money at some point. In that situation it’s a
race between your money and your life span. If your nest egg continues
to grow, though, it will always last longer than you.
This can be done. For instance, I started managing
Joe’s account in 2002. He originally transferred in $432,000 and was
taking a monthly paycheck of $3,000. His ‘paycheck’ was equal to 8% of
his nest egg.
His paycheck is automatically deposited in his
checking account at the beginning of each month. Taxes are even taken
out of it so he doesn’t have to worry about filing quarterly estimated
taxes.
Joe has continued to receive his monthly $3,000
paycheck. He can increase it if he wants but he hasn’t had the need to
so far. He has received almost $150,000 in ‘pay’ since then. And his
nest egg hasn’t decreased in size. In fact, his nest egg is worth over
$510,000 today.
I imagine every retiree would like to be in Joe’s
position. And it’s possible you can be by making a few, simple
adjustments in the way you view retirement investing. I’ll explain the
details of this approach in my next article.
If you have a specific question or would like more
information, give me a call toll-free at 1-877-827-1463 or you can also reach me by email at
jeff@guardingyourwealth.com.
I will answer your financial question FREE.
About Guarding Your Wealth:
“Guarding Your Wealth” is a
nationally syndicated weekly personal finance column written by Jeffrey
D. Voudrie, CFP. Mr. Voudrie is the President of Legacy Planning Group,
a private wealth management firm that employs sophisticated proprietary
strategies designed to protect and grow its clients' investments. Visit his website,
www.guardingyourwealth.com to read past articles under the Guarding
Your Wealth Article Archive that may not have appeared in
SeniorJournal.com.
Guarding Your Wealth for Seniors, on
SeniorJournal.com, is
a collection of columns by Voudrie that deal with issues of particular
interest to senior citizens.
Click here
for all columns.
In addition to being a nationally
syndicated columnist and Certified Financial Planning Practitioner, Mr.
Voudrie provides personal, private money management services to select
private clients
nationwide.
Looking for an energetic expert who
is passionate about financial and wealth management? Mr. Voudrie is an
excellent speaker who will excite and inspire your audience. Mr. Voudrie
is available for a limited number of speaking engagements, television
appearances and radio talk shows. For bookings, email
jeff@guardingyourwealth.com.
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