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How Long Are You Going to Live ? Retirement Planning

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. How long is this money supposed to last, which could cause problems later in life?

Time is Always Ticking

For those planning their retirement with a Pension as the cornerstone of their Golden Years, lifespan is not as important. You will have income as long as you keep breathing (and your pension plan does the same (remember Nortel)). 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 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).

Retirement Planning by Preet?

As Moneysense quoted Preet

Stop Over-thinking Your Money!: The Five Simple Rules Of Financial Success

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 parent’s age due to better medical systems? It’s all up to you. 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 overemphasize this point.

Feel Free to Comment

  1. Always love your thought provoking articles! My wife and I are teachers and have 6 rental investments that will be paid off around time of our retirement. Pensions = $6000 total. Rental income approx $3000/mo. (The rental income will be $7000/mo when all rentals are paid off completely). I am wanting to get some advice or read some books/articles on planning this out. Can you point me in the right direction? Thanks kindly, Kelly

    1. Lots of books out there, sounds like a plan. Do the math on what you think your monthly expenses might be in retirement and see how those values map. Read the Wealthy Barber and the follow on book to start.

  2. S**T! Now I have to change some of my planning. I told my GP that I planned to live till 200 yrs. Although he said he has not seen that yet I told him I was counting on him.
    Now I have to go out and buy an annuity to make sure I have some spending money for my nights out.
    Another type of annuity is…children. You brought them up, put them through school and porbably a bit more so it is pay back time.
    I just may start a second family to increase my “annuity”. Wonder if there any fine lasses out there for a 64 yr old. LOL


  3. Estimating your date of death is problematic. I’ve put together a calculator on our website that estimates it (actually, it shows various estimates using current data right back to the early 1800’s).

    But those numbers are misleading or at least misunderstood. These calculators don’t estimate when yuo’re going to die – they estimate average age at death. If it says age 84 for you – what you should take away is that you actually have a 50% chance of living past age 84.

    Manulife did some research on this a few years ago. It had to do with the probability of running out of money. They did some ‘maths’ around putting some money into investments and some money into annuities. The annuities are likely going to pay less than the investments, but are guaranteed to last for life. Where’s the balance between higher earnings that could potentially run dry and annuities with lower earning but lifetime guarantee? That’s what they worked on. In the end, a portion of your earnings in an annuity may make sense. (or for some of us, assuming CPP/OAS is the baseline annuity may make sense).

    Personally I’m going to attempt to have enough money saved that I don’t have to worry about this (assume we live on investments and retain capital past our deaeth). That’s just having a higher savings amount. I’ve backed that assumption up with some life insurance to generate that lump sum should I die early.

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