Make Your Retirement Money Last

Recent statistics1 show you could live longer than you think, but will your retirement money be there for you?

Properly assessing time horizon—the length of time you need your retirement money to last—is a critical component of retirement investing. In our experience, many investors don’t fully appreciate what retirement actually look like. Many seem to approach retirement as though it will be a relatively short period—perhaps influenced by their parents’ and grandparents’ experiences.

As a result, their savings could end up running short—making it difficult to pay for day-to-day expenses or to retire as comfortably as they would like. In our view, too many Americans mismanage this aspect of their retirement, only to find out—too late—that they need their retirement money and other savings to last longer than they expected!


Assessing Time Horizon as Part of Your Retirement Plan

Calculate Potential Income and Expenses

Fisher Investments believes it is wise to have a retirement plan in place well before you start to withdraw money from your IRA, 401k, or other retirement or savings account. Your retirement plan should take into account your full financial picture. It should assess potential income from retirement accounts, Social Security, pensions, savings accounts and annuities.

Your plan should also account for ongoing expenses such as non-discretionary and discretionary spending, including debt payments such as mortgages and credit cards.

To be successful, we believe you should design your plan to give you the highest probability of reaching your long-term financial objectives over the course of your time horizon after you retire.


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Statistics on How Long You May Need Your Retirement Money to Last

Relevant data can help serve as a guidepost in determining your time horizon and how long you may need your retirement savings to last. Life expectancy can be a helpful reference point, but it’s also a moving target: The longer you live, the longer you are expected to live.

According to the US Social Security Administration, a 65-year-old is expected to live to 83, while an 83-year-old is expected to live to 90. So if you live to the average 65-year-old life expectancy of 83, you may need to be financially prepared to fund your retirement for another 7 years, or more!1

In other words, if an American investor were to retire and begin to draw from their retirement assets as soon as they can legally tap tax-deferred retirement assets without penalty (age 59½), on average they will need retirement income for over two decades (or maybe even longer if they need to plan for a spouse or partner as well!).


Additional Data Suggests Higher Earners Likely Live Even Longer

Separate data and reports add weight to the argument higher earners and savers will likely need income even longer. To be clear, we’re not making any political statement here, but average life expectancies include data from individuals who cannot afford great health care, those who didn’t have access to health information, and those who couldn’t afford higher-quality food. According to a 2016 study by the Brookings Institution, higher earners’ life expectancies have grown significantly more than lower earners’, based largely on a lifetime of better access to nutritious foods, health care and information about health-related topics.2

As the Brookings study noted:

The average life expectancy of a man born in 1920 in the top 10 percent of the mid-career income distribution is 79.3 years. The same man in the bottom 10 percent of the distribution has an average life expectancy 5 years lower. Worse still is that the gap has grown over time. For men born 20 years later in 1940, the difference in average life expectancy is 12 years.

So, if you are a high net worth investor, the Brookings Institution study suggests you are more likely to live longer than the average.


Prepare Now So Your Retirement Money Lasts

Many investors disregard these statistics, though. Instead, they look at how old their parents or grandparents were when they passed away and presume that applies to them. While family history certainly is a consideration, Fisher Investments believes you must factor in medical and nutritional advances, as well as your own personal health. Importantly these data are averages—in other words, about half will live even longer (or shorter) than the figures in these reports.

Of course, everyone’s circumstances are different. Your time horizon may end up being much higher or lower than the averages the data suggests. But knowing that many live longer than the average, ask yourself: How prepared is your portfolio for the risk you are one of them? Do you have sufficient retirement savings if you end up living longer than you expect as a retiree? Will you be able to reach your long-term financial goals? How much might you need to rely on Social Security?

Planning for a longer time horizon can decrease the probability you run out of money and exhaust your retirement savings. No one wants to pay later in life because they didn’t think they would still be alive.



1US Social Security Administration – Period Life Table, 2020. Life expectancy rounded to the nearest year.

2 Barry P. Bosworth, Gary Burtless, and Kan Zhang. Brookings Institute. “What growing life expectancy gaps mean for the promise of Social Security.” February 12, 2016. https://www.brookings.edu/research/what-growing-life-expectancy-gaps-mean-for-the-promise-of-social-security/


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