Are You at Risk for Outliving Your Retirement Money?

Could underestimating your longevity mean you’ll run out of retirement money?

At age 65, the average life expectancy is 81.8 years for a man and 84.8 years for a woman. At age 75, the average life expectancy is 85.5 years for a man and 87.6 years for a woman.1 With recent advances in medical science, it’s no longer a stretch to think that you could live to be 100. In fact, the U.S. Census Bureau projects that by 2050, there will be nearly one million centenarians2.

No one wants to die sooner, so that’s great news. The problem: If your retirement plan doesn’t recognize the possibility of a long retirement, then you could potentially outlive your retirement money.

Consider the following hypothetical example. Assume you’re 64 years old and earn $60,000 per year. You plan to retire next year at age 65. You’ve accumulated $1,000,000 in retirement money, which you think will return a hypothetical 6 percent per year throughout your retirement. And, you have a $60,000 annual retirement need (excluding Social Security). If you have a 15-year retirement from ages 65 to 80, you’ll have no shortfall in retirement money; in fact, you’ll end up with almost $696,000 to pass on to your heirs. On the other hand, if you have a 30-year retirement from ages 65 to 95, you’ll run out of money at age 88.3 The table below illustrates. Of course, this example above is hypothetical and for illustrative purposes only. It is not meant to represent the performance of any particular product.

Will you run out of retirement money?

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Source: Burling Bank. Assumes $1,000,000 in retirement savings has already been accumulated; another $60,000 is added. The money grows at a hypothetical 6 percent pear year; $60,000 (in today’s dollars) in withdrawn each year. This example above is hypothetical and for illustrative purposes only. It is not meant to represent performance of any particular product.

1 Source: National Center for Health Statistics, as of March 2006 (http://www.cdc.gov/nchs/data/hus/hus05.pdf#027).

2 Source: The US Census Bureau’s “National Population Projection”  as of July 2004 ).

3 Source: Burling Bank retirement calculator, .