Tags: Cleaver | retirement | plan | saving

Living to 100: It's Not Your Parents' Retirement Plan

By    |   Tuesday, 17 March 2015 07:20 AM

With life expectancies continually increasing, more and more of us are living to the age of 100. So how should we plan our finances, so we aren't broke if we reach that milestone?

Joanne Cleaver of U.S. News & World Report offers several tips.

"Don't take cues from how your parents managed their retirement resources and time," she writes. They probably retired at age 65 and lived comfortably on the income from a fixed-benefit pension, Social Security and a small investment portfolio. Nowadays, you may well have to work past 65. Most of us will receive our retirement income through 401(k)s and IRAs rather than a fixed-benefit pension. Social Security might just represent a small supplement, while our investment portfolios will account for a large portion of our wealth.

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"Treat your portfolio like an endowment." Jan Blakeley Holman, director of advisor education for Thornburg Investments, recommends to Cleaver that you follow "smoothing" rules that calibrate each year's combination of withdrawals and hopeful portfolio growth so that you don't draw down your principal. 

But what if you want to retire early? MarketWatch retirement writer Elizabeth O'Brien provides several recommendations.

"Live below your means." Sheyna Steiner, senior investing analyst at Bankrate, tells O'Brien that a good rule of thumb is to save 25 times your annual budget before retirement. "For those of us who [aren't top executives,] generating a nest egg of that size involves years of frugality," Steiner notes. Avoid purchases large — a car, a home — and small — gourmet coffee — whenever possible. Any money you save and then invest wisely will multiply through the wonder of compounding.

"Stay appropriately aggressive." The idea that you need a very conservative investment strategy in retirement is a myth. You actually need some stocks to grow your wealth enough to fund your retirement needs. Joe Heider, president of Cirrus Wealth Management, told Steiner that a good rule of thumb is to weight your portfolio 60 percent toward stocks a few years before retirement and then stick to that allocation. Remember that equities have historically returned about 9 percent a year, compared with 3 to 5 percent for bonds.

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With life expectancies continually increasing, more and more of us are living to the age of 100. So how should we plan our finances, so we aren't broke if we reach that milestone?
Cleaver, retirement, plan, saving
378
2015-20-17
Tuesday, 17 March 2015 07:20 AM
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