Post by Zoinkers on Aug 13, 2006 1:11:36 GMT -5
A key to making your money last is knowing how long it has to last -- a guesstimate, at best. A 65-year-old man today has a life expectancy of about 16 years, according to government tables, and a 65-year-old woman, about 19 years. But these are average figures. Lots of people live longer, which explains why retired Boulder, Colo., financial planner Michael Stein, author of The Prosperous Retirement: Guide to the New Reality (Emstco Press, $19.95), suggests adding 50% to average life expectancies as a margin of safety. Rozanna Patane, a York Harbor, Me., planner, figures her clients will live to age 100. "People used to laugh at me," she says, "but now more are starting to wonder whether that is enough."
By the time you hit retirement, you should have a pretty good handle on how much money it takes to live the way you like. The old rule of thumb that retirees can live on 70% to 80% of preretirement income doesn't work for everybody.
Retirement spending, especially in the early years when you're active and healthy, often pushes a budget above preretirement levels. Travel expenses may go up. Medical-insurance costs may soar if you retire when you are too young for medicare and you have no employer-provided retiree health benefit.
Other expenses may go down. Job-related costs will disappear, including the portion of your salary you're now shoveling into retirement accounts. Your mortgage payments may end, too. Will you drop or cut back on life insurance?
Once you have a target of how much you'll need each year, consider the resources you have. Although social security is likely to be remodeled in the future, current and soon-to-be retirees are still in the catbird's seat. To find out how much to expect, ask the Social Security Administration for an estimate of your benefits by going to the agency's Web site. You'll also need to figure how much you'll get from company pensions you racked up in various jobs over your career.
By the time you hit retirement, you should have a pretty good handle on how much money it takes to live the way you like. The old rule of thumb that retirees can live on 70% to 80% of preretirement income doesn't work for everybody.
Retirement spending, especially in the early years when you're active and healthy, often pushes a budget above preretirement levels. Travel expenses may go up. Medical-insurance costs may soar if you retire when you are too young for medicare and you have no employer-provided retiree health benefit.
Other expenses may go down. Job-related costs will disappear, including the portion of your salary you're now shoveling into retirement accounts. Your mortgage payments may end, too. Will you drop or cut back on life insurance?
Once you have a target of how much you'll need each year, consider the resources you have. Although social security is likely to be remodeled in the future, current and soon-to-be retirees are still in the catbird's seat. To find out how much to expect, ask the Social Security Administration for an estimate of your benefits by going to the agency's Web site. You'll also need to figure how much you'll get from company pensions you racked up in various jobs over your career.