Will You Outlive Your Retirement Savings?

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Many people base their retirement saving and distribution strategies on life expectancy projections made by the Social Security Administration. According to these projections, once he has reached age 65, the average male in the United States will live to age 84 and the average female will live to age 86.

But there’s something very important you have to remember when it comes to these projections: They are only averages. Your life span could be shorter or longer than this — which could significantly impact your retirement saving and distribution strategies.

Revealing Statistics

In a recent blog post, financial columnist Jane Bryant Quinn cited some revealing statistics regarding different life expectancies for Americans based on their income levels. According to Quinn, the higher your income, the longer you might live.

For example, the wealthiest 20 percent of men who have turned 50 will live to age 89 on average, while the poorest will only live to age 76 on average. Meanwhile, the wealthiest 20 percent of women who have turned 50 will live to age 92 on average. Even more tellingly, about half of the wealthiest men and women who have turned 50 will live longer than these averages.

The average life expectancies in the next wealthiest 20 percent of men and women who have turned 50 are about the same: age 88 for men and 91 for women. Also, the number of Americans who are 90 years of age or over has tripled over the past 30 years, according to Quinn.

Rethink Your Strategy

If you are in the top 40 percent of Americans income-wise and you’ve been basing your retirement saving and distribution strategies on the Social Security average ages of 80 and 83, you may need to rethink this strategy. Based on the statistics noted above, you could easily live between eight and 11 years longer than this, on average.

For example, assume you plan to retire at age 65. Based on the Social Security projections, you’d need your retirement savings to last 15 years if you’re a man and 18 years if you’re a woman, on average. But if you’re among the top 20 percent of Americans income-wise, you’ll need your retirement savings to last 24 years if you’re a man and 27 years if you’re a woman, on average. That’s a big difference!

Key Takeaways

Below are Frontier’s two main takeaways from these statistics:

  1. You may need to save significantly more money for retirement than you currently think you do. Are there ways you can boost your contributions to your 401(k), IRA or other retirement savings plan? For example, maybe you can cut your expenses or take on a side job to earn extra income that can be devoted to retirement savings.
  2. You may need to keep your retirement savings invested in more aggressive but also riskier investments, like stocks and stock mutual funds, longer than your originally thought. Typically, many people start shifting their asset allocation away from equities and toward fixed-income securities and cash equivalents as they near retirement age.

However, if you’re going to live in retirement for 24 to 27 years or longer, then you may need the growth potential of equities well past the age when you might otherwise shift to less-risky types of investments. Keep in mind that the average bear market since World War II has lasted just 29 months, according to Quinn. So if your portfolio is well diversified, you may be able to ride out short-term stock market dips even if you’ve already retired.

Of course, everyone’s situation is unique so you should talk to your financial advisor about the best strategies for your circumstances. Please contact us if you have more questions about retirement saving and distribution strategies.


The commentary is limited to the dissemination of general information pertaining to Frontier Wealth Management, LLC's ("Frontier") investment advisory services. This information should not be used or construed as an offer to sell, a solicitation of an offer to buy or a recommendation for any security, market sector or investment strategy. There is no guarantee that the information supplied is accurate or complete. Frontier is not responsible for any errors or omissions, and provides no warranties with regards to the results obtained from the use of the information. Nothing in this document is intended to provide any legal, accounting or tax advice and Frontier does not provide such advice. This information is subject to change without notice and should not be construed as a recommendation or investment advice. You should consult an attorney, accountant or tax professional regarding your specific legal or tax situation.

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