Let’s suppose that you — or your spouse or partner — live to age 100. Will your money last that long? You don’t want to experience “money death” before leaving this planet for good. Even if you don’t live to be 100, it’s smart to make sure your retirement income will last a long time, because there’s a good chance you’ll make it to your 90s.
If you’re currently in your 60s, it’ll take a lot of money to be fully retired for 30 years or more. Let’s just do one simple reality check to illustrate. Suppose you spend $50,000 per year on all your living expenses — housing, food, utilities, medical premiums, medical expenses, entertainment and so on. This isn’t a bad assumption, given that the average American household spent $51,442 per year on these expenses in 2012, according to the Consumer Expenditure Survey. If you live 30 years, that’s $1.5 million, and we haven’t even factored in inflation, which is sure to increase your living expenses.
Do your IRAs and 401(k) accounts total $1.5 million?
The good news is, they don’t have to. You have other sources you can also count on, such as Social Security, employment income or an employer-sponsored pension, if one is coming to you. But you’ll still want to plan your finances carefully to make sure you’ll have enough to cover your living expenses until age 100 and beyond.
SOURCE: STEVE VERNON