Can underestimating your longevity imply you’ll use up all your retirement investments?
At age 65, the average life expectancy is eighty one.8 yrs for a male and 84.8 yrs for a female. At the age of 75, the average life span is 85.5 yrs for a man and eighty seven.6 yrs for a female.1 With latest advances in healthcare technology, it’s no longer a stretch to believe that you can live to be one hundred. In fact, the U.S. Census Bureau projects that by 2050, there’ll be nearly one million centenarians.
No one desires to die sooner, so that’s great news. The problem: In case your retirement strategy doesn’t recognize the chance of a long retirement, then you could potentially outlive your retirement investments.
Consider the subsequent hypothetical example. Assume you’re 64 yrs old and earn $60,000 per year. You intend to retire next year at age sixty five. You’ve gathered $1,000,000 in retirement investments, which you think that will return a hypothetical 6 % each year all through your retirement. And, you’ve got a $60,000 annual retirement need (not including Social Security). When you have a 15-year retirement from ages 65 to 80, you will don’t have any shortfall in retirement investments; actually, you’ll end up with nearly $696,000 to pass on to your beneficiaries. Alternatively, when you have a 30-year retirement from ages sixty-five to ninety five, you’ll exhaust money at the age of 88.3 The table beneath shows. Of course, this example above is theoretical and for illustrative purposes only. It isn’t meant to represent the performance of any specific item.
Are you going to use up all your retirement investments?
Hypothetical retirement money needs
| Age | Savings | Retirement investments required for annual living expense |
| 64 | $1,000,000.00 | $0.00 |
| 64 | $1,059,999.94 | $0.00 |
| 66 | $1,058,028.28 | $61,860.00 |
| 67 | $1,053,905.60 | $63,777.66 |
| 68 | $1,047,439.82 | $65,754.77 |
| 69 | $1,038,425.39 | $67,793.17 |
| 70 | $1,026,642.42 | $69,894.76 |
| 71 | $1,011,855.72 | $72,061.50 |
| 72 | $993,813.88 | $74,295.41 |
| 73 | $972,248.18 | $76,598.57 |
| 74 | $946,871.51 | $78,973.12 |
| 75 | $917,377.18 | $81,421.29 |
| 76 | $883,437.69 | $83,945.35 |
| 77 | $844,703.39 | $86,547.66 |
| 78 | $800,801.08 | $89,230.64 |
| 79 | $751,332.50 | $91,996.79 |
| 80 | $695,872.80 | $94,848.69 |
| 81 | $633,968.79 | $97,789.00 |
| 82 | $565,137.20 | $100,820.46 |
| 83 | $488,862.75 | $103,945.90 |
| 84 | $404,596.18 | $107,168.22 |
| 85 | $311,752.06 | $110,490.44 |
| 86 | $209,706.59 | $113,915.65 |
| 87 | $97,795.12 | $117,447.03 |
Source: Burling Bank. Presumes $1,000,000 in retirement investments has already been accumulated; an additional $60,000 is added. The money grows at a hypothetical six percent per yr; $60,000 (in today’s dollars) in withdrawn every year. This instance above is theoretical and for illustrative purposes only. It is not meant to represent performance of any particular item.
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