What does this have to do with retirement planning? Everything!
Many folks are planning for a retirement, but don’t have a number in mind, about how long this money is supposed to last, which could cause problems later in life (said Captain Obvious).
For those planning their retirement with a Pension as the cornerstone of their Golden Years, how long you live is not as important, because you will have income as long as you keep breathing (and your pension plan does the same (remember Nortel)), but if you are planning on creating a Big Bucket of Money that you will then draw from for your retirement, you need to figure out when you are going to “pack it in”.
The other advantage a pensioner has, is that the pension payments won’t (or at least shouldn’t) decrease in value . They may decrease in value if the pension is not indexed against inflation, but unless another Nortel situation arises, most pensions shouldn’t drop in value, however, those who have a Big Bucket of Money, they have to live that delicate balance of having growth in the “Big Bucket”, but careful growth so that value is mostly lost from withdrawal (and not losing value).
As Preet was quoted by Moneysense
— MoneySense (@MoneySense) April 9, 2015
So what should your “lifespan” number be? How long did your parents live for, that would be a good barometer (as long as there aren’t mitigating circumstances like smoking or being hit by a truck) to start your calculations. Maybe add 10% to your parents age, due to better medical systems? It’s all up to you, but if you want to do as Preet advises might be better to overestimate how much money you will need.
Yes I have written about this before with Retirement Do’s and Don’ts , One Thing to Do Before You Retire and Going to the Gym to Work on my Retirement, but I don’t think I can over emphasize this point.