Yahoo Finance 6 Signs You Can’t Afford To Live Past 90
According to the Social Security Administration, around one in every three 65-year-olds will live to age 90. Unfortunately, when planning for retirement, many people plan to live shorter lives and then find themselves running out of money. This increased life expectancy has made saving for retirement more of a challenge.
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“A recent study from Corebridge Financial and The Longevity Project found that over half of Americans (54%) want to live to 100 but two-thirds of Americans (66%) fear running out of money more than death,” said Tina Haley, senior vice president at Corebridge Financial. “The potential of living a very long life highlights the need to actively plan and prepare — so you can push aside worries about running out of money and focus on living life the way you want, no matter how long you live.”
Keep reading as we discuss some signs that you might not be able to afford to live past 90.
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You Didn’t Factor In Inflation When Saving for Retirement
When figuring out how much you need to save for retirement, you need to factor in a few things, one of which is inflation. The prices for goods and services in the U.S. typically rise about 3% annually. That means things will cost more over time, and you need to plan for it.
If you have $100,000 saved for retirement, it will likely be worth about 60% less in buying power over 20 years. If you don’t include inflation in your retirement calculations, you will be more likely to run out of money as the years go on.
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Taxes Caught You Off Guard
When figuring out how much to save for retirement, it’s important to consider taxes. Taxes can significantly reduce your retirement income. For instance, if you withdraw from a 401(k) or IRA, you’ll be required to pay income taxes on that amount. This means the withdrawal will need to cover your living expenses and the taxes owed.
Given the state of the housing market in recent years, let’s not forget property taxes. They could increase rapidly in response to price appreciation, and you suddenly have a larger property tax bill. These taxes could drastically cut into your savings.
Saving in a combination of taxable, tax-deferred, and tax-free accounts can help you have choices for later. Plus, do your best to avoid withdrawing money from retirement accounts earlier than you need to avoid unnecessary taxes and fees.
You Are Accumulating Debt
If you accumulate more debt during retirement, you will run out of money sooner than you think. It would be ideal if any major debt like a mortgage or student loans were paid off before retiring, but if not, you should at least know how to factor in these debt payments in your retirement budget.
Accumulating new debt during retirement, however, will be much more difficult. Credit card or personal loan debt should be a warning sign of trouble to come.
You Are Living an Unsustainable Lifestyle
Retirement is a time to enjoy yourself without having to work. Your lifestyle is expected to change some, as you have more free time to spend on traveling, hobbies, dining out and more.
However, if you live an unsustainable lifestyle that goes beyond your means, you will have trouble making your retirement savings last as long. Be sure not to spend more than you can afford and cut back on unnecessary spending.
Your Retirement Savings Doesn’t Account for Large Unexpected Expenses
Unexpected expenses are going to happen. That’s why most professionals recommend having an emergency fund. It will allow you to cover those unexpected expenses.
You must also account for unexpected expenses when planning how much money you’ll need for retirement. Things like a new roof on your home, a large medical bill, or an expensive car repair can greatly impact your retirement savings and cause you to run out of money sooner than you had planned.
You Retired Too Early
You can start receiving Social Security benefits as early as age 62, but that can cause you to miss out on valuable benefits. The longer you wait to start receiving Social Security, the larger your monthly benefit will be.
If you start receiving Social Security at full retirement age (67 if you were born after 1960), you can receive 100% of your monthly retirement benefit. In contrast, if you take Social Security benefits at age 62, you will lose 30% of your full Social Security benefits that you would have received at the age of 67. And for every month that you wait between the ages of 67 and 70, you will receive more money. If you wait until 68, you will receive 108% of your social security benefits. This increases by 8% each year until the age of 70.
“One practical example of how to make income a part of your retirement plan is to make sure you can cover your essential retirement expenses with guaranteed sources of income,” said Haley. “First, identify your essential expenses like housing, utilities, groceries and healthcare, and then build a plan that matches income from guaranteed sources, such as Social Security, pensions and annuities, with these essential expenses.”
The Bottom Line
It’s difficult to plan how much money to save for retirement. There are many factors to consider, including how long you will live. It’s best to plan as if you are going to live past age 90 to make sure you don’t run out of money at the end of your life.
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This article originally appeared on GOBankingRates.com: 6 Signs You Can’t Afford To Live Past 90
