By now, you might have seen the February 23 issue of Time magazine with a picture of an adorable baby looking back at you. The headline reads, “This Baby Could Live to Be 142 Years Old.” The baby looks as surprised as you. How is that possible?
Well, consider this. In 1900, if you told someone they could live to be 79 years old (today’s average life expectancy), they probably would have carted you off to the funny farm. Because in 1900, the average life expectancy in the United States was only 47 years old!
So, yes, we are living longer, and for the sake of this conversation, let’s stick with what we know. That is, today’s life expectancy is 79 years old. Of course, people who take care of themselves and have access to good medical care can live into their mid-nineties. That’s the good news. But it can be bad news for our money. Think about it. If one were to retire at age 65 and live to age 95, his money has to support him for another good thirty years. In these days of shrinking pensions and threats to the solvency of Social Security, that is no small task.
So, here are my eight suggestions on how to not outlive your money:
1. Delay retirement until age 70. This allows you to delay taking your Social Security benefit until age 70 which, by the way, is the highest payout.
2. Start saving at a young age. If a 25-year-old starts saving 10% of his income for retirement, he will likely be a millionaire by the time he is 70 (unless #3 occurs).
3. When you change jobs, don’t cash in your 401k to buy stupid stuff. A great way to sabotage your financial future is to cash in your retirement account and start over. Time will start working against you instead of for you.
4. At retirement, consider some form of guaranteed lifetime income. There are many options. So speak with your financial adviser to find out if one is appropriate for you.
5. Don’t forget to factor in the increase in the cost of living during your retirement years.
6. Make “zero” your retirement number. Yes, that’s right—“zero” as in zero debt. Pay of all non-productive debt before you retire
7. Retire in a foreign country. Many countries especially in Central and South America want you to retire there. They will not tax you on your retirement income, and the cost of living is much less expensive compared to the US.
8. If all else fails, marry a teacher or civil service worker. They usually have pretty good pensions!