Average Life Expectancy*
*Source: 2006 US Total Population Life
Table (revised as of 06/28/2010). National Vital Statistics Reports,
volume 58, Number 21. Life expectancy rounded to nearest year.
Compared to the length of retirement,
fifteen minutes is no time at all. But that's all you need to learn the
basics of developing a plan to make your savings last as long as you
need them. Still, many investors don't take this time-putting their
retirement in jeopardy.Investors' biggest errors often occur long before any buying or selling takes place. They tend to have poorly defined objectives, no real sense of their time horizon (how long they need the money to last) and don't quite understand that any investment has risks and returns to consider.
To start, ask yourself how long you'll need your retirement savings.
Most investors need their savings to last as long as they do-sometimes longer if you'd like your portfolio to support a younger spouse, children or charity after you're gone. So exactly how long that could be isn't black and white. Average life expectancies are published every year, but they can only tell you so much. After all, an average is the middle, and you probably aren't exactly "average." To get a better idea, consider your heredity-your family's history of health and longevity. Be sure to consider advances in health care and technology! Merely because your father lived to be 70 doesn't mean you'll do the same. Most people outlive their ancestors, hence rising average life expectancies. Planning for a longer life early is smart.
You could also be underestimating the amount of cash flow you'll need after retirement.
Maintaining your lifestyle becomes much more costly if your expenses are heavily tilted to categories of goods or services with fast-rising prices-like health care! Overall inflation has averaged 3% annually-a retirement plan that doesn't account for inflation has a significant hole.**
Source: Retirement cheatsheet
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